Is Allegro MicroSystems, Inc. (ALGM) A Good Stock To Buy?

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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 second quarter of 2021. One of these stocks was Allegro MicroSystems, Inc. (NASDAQ:ALGM).

Is ALGM a good stock to buy? Allegro MicroSystems, Inc. (NASDAQ:ALGM) has seen an increase in hedge fund interest lately. Allegro MicroSystems, Inc. (NASDAQ:ALGM) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 16 hedge funds in our database with ALGM positions at the end of the fourth quarter. Our calculations also showed that ALGM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the recent hedge fund action regarding Allegro MicroSystems, Inc. (NASDAQ:ALGM).

Do Hedge Funds Think ALGM Is A Good Stock To Buy Now?

At the end of March, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALGM over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Allegro MicroSystems, Inc. (NASDAQ:ALGM) was held by Shelter Haven Capital Management, which reported holding $16.7 million worth of stock at the end of December. It was followed by Point72 Asset Management with a $15.6 million position. Other investors bullish on the company included Adage Capital Management, Schonfeld Strategic Advisors, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Allegro MicroSystems, Inc. (NASDAQ:ALGM), around 5.27% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, earmarking 1.01 percent of its 13F equity portfolio to ALGM.

Now, some big names were breaking ground themselves. Shelter Haven Capital Management, managed by Jerry Kochanski, assembled the most valuable position in Allegro MicroSystems, Inc. (NASDAQ:ALGM). Shelter Haven Capital Management had $16.7 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $6.6 million position during the quarter. The other funds with brand new ALGM positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Rob Citrone’s Discovery Capital Management, and Michael Rockefeller and KarláKroeker’s Woodline Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Allegro MicroSystems, Inc. (NASDAQ:ALGM) but similarly valued. We will take a look at FTI Consulting, Inc. (NYSE:FCN), Stantec Inc. (NYSE:STN), Fisker Inc. (NYSE:FSR), Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), Marathon Digital Holdings, Inc. (NASDAQ:MARA), BlackBerry Limited (NYSE:BB), and Synaptics Incorporated (NASDAQ:SYNA). All of these stocks’ market caps are similar to ALGM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FCN 24 520173 -1
STN 9 39824 2
FSR 22 337954 4
SHI 4 14885 -1
MARA 10 197814 2
BB 24 499771 -7
SYNA 25 533817 -3
Average 16.9 306320 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $90 million in ALGM’s case. Synaptics Incorporated (NASDAQ:SYNA) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 4 bullish hedge fund positions. Allegro MicroSystems, Inc. (NASDAQ:ALGM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALGM is 67. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately ALGM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALGM were disappointed as the stock returned 3.2% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.