In this article we will take a look at whether hedge funds think Alico, Inc. (NASDAQ:ALCO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Alico, Inc. (NASDAQ:ALCO) was in 8 hedge funds' portfolios at the end of March. ALCO has seen a decrease in support from the world's most elite money managers lately. There were 9 hedge funds in our database with ALCO holdings at the end of the previous quarter. Our calculations also showed that ALCO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Martin Whitman Third Avenue Management Marty Whitman
Martin Whitman of Third Avenue Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to view the fresh hedge fund action surrounding Alico, Inc. (NASDAQ:ALCO).
Hedge fund activity in Alico, Inc. (NASDAQ:ALCO)
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in ALCO a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Birch Run Capital, managed by Daniel Beltzman and Gergory Smith, holds the number one position in Alico, Inc. (NASDAQ:ALCO). Birch Run Capital has a $4.5 million position in the stock, comprising 4% of its 13F portfolio. The second largest stake is held by Third Avenue Management, managed by Martin Whitman, which holds a $4.4 million position; 0.6% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Raymond J. Harbert's Harbert Management, Renaissance Technologies and Thomas E. Claugus's GMT Capital. In terms of the portfolio weights assigned to each position Harbert Management allocated the biggest weight to Alico, Inc. (NASDAQ:ALCO), around 6.66% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, designating 4.02 percent of its 13F equity portfolio to ALCO.
Seeing as Alico, Inc. (NASDAQ:ALCO) has experienced bearish sentiment from the smart money, it's easy to see that there exists a select few hedge funds that elected to cut their positions entirely by the end of the first quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of all the hedgies watched by Insider Monkey, comprising close to $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund dumped about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Alico, Inc. (NASDAQ:ALCO) but similarly valued. We will take a look at Bonanza Creek Energy Inc (NYSE:BCEI), Fulgent Genetics, Inc. (NASDAQ:FLGT), CIRCOR International, Inc. (NYSE:CIR), and Sutro Biopharma, Inc. (NASDAQ:STRO). All of these stocks' market caps are similar to ALCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCEI,13,47803,-3 FLGT,9,14912,-2 CIR,12,41990,2 STRO,13,49596,-1 Average,11.75,38575,-1 [/table]
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $19 million in ALCO's case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Fulgent Genetics, Inc. (NASDAQ:FLGT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Alico, Inc. (NASDAQ:ALCO) is even less popular than FLGT. Hedge funds dodged a bullet by taking a bearish stance towards ALCO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately ALCO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ALCO investors were disappointed as the stock returned 1.8% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
