We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was AllianceBernstein Holding LP (NYSE:AB).
Is AllianceBernstein Holding LP (NYSE:AB) the right investment to pursue these days? Investors who are in the know are betting on the stock. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that AB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). AB was in 11 hedge funds' portfolios at the end of December. There were 8 hedge funds in our database with AB holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="399"] Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a peek at the recent hedge fund action surrounding AllianceBernstein Holding LP (NYSE:AB).
What does smart money think about AllianceBernstein Holding LP (NYSE:AB)?
At Q4's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AB over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AllianceBernstein Holding LP (NYSE:AB) was held by Arrowstreet Capital, which reported holding $25.7 million worth of stock at the end of September. It was followed by Royce & Associates with a $11.8 million position. Other investors bullish on the company included Marshall Wace LLP, Schonfeld Strategic Advisors, and GAMCO Investors. In terms of the portfolio weights assigned to each position Dorset Management allocated the biggest weight to AllianceBernstein Holding LP (NYSE:AB), around 0.62% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to AB.
As industrywide interest jumped, key hedge funds have jumped into AllianceBernstein Holding LP (NYSE:AB) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in AllianceBernstein Holding LP (NYSE:AB). Marshall Wace LLP had $5.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also made a $3.4 million investment in the stock during the quarter. The other funds with brand new AB positions are Ken Griffin's Citadel Investment Group and Frederick DiSanto's Ancora Advisors.
Let's also examine hedge fund activity in other stocks similar to AllianceBernstein Holding LP (NYSE:AB). These stocks are Ryder System, Inc. (NYSE:R), Grocery Outlet Holding Corp. (NASDAQ:GO), Guangshen Railway Co. Ltd (NYSE:GSH), and Diodes Incorporated (NASDAQ:DIOD). All of these stocks' market caps resemble AB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position R,23,347690,1 GO,14,78999,-1 GSH,1,4453,-2 DIOD,18,79913,-5 Average,14,127764,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $54 million in AB's case. Ryder System, Inc. (NYSE:R) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. AllianceBernstein Holding LP (NYSE:AB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately AB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AB investors were disappointed as the stock returned -36.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.