Should I Buy Albemarle Corporation (ALB)?

Is Albemarle Corporation (NYSE:ALB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Albemarle Corporation (NYSE:ALB) was in 31 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 40. ALB investors should pay attention to an increase in hedge fund sentiment recently. There were 21 hedge funds in our database with ALB positions at the end of the fourth quarter. Our calculations also showed that ALB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Matthew Hulsizer PEAK6 CapitalMatthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Keeping this in mind we're going to check out the key hedge fund action surrounding Albemarle Corporation (NYSE:ALB).

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

At first quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from the fourth quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in ALB a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Albemarle Corporation (NYSE:ALB), with a stake worth $77.4 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $48.3 million. Citadel Investment Group, Adage Capital Management, and PEAK6 Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Albemarle Corporation (NYSE:ALB), around 6.75% of its 13F portfolio. Value Star Asset Management is also relatively very bullish on the stock, earmarking 3.4 percent of its 13F equity portfolio to ALB.

As aggregate interest increased, key money managers have jumped into Albemarle Corporation (NYSE:ALB) headfirst. Renaissance Technologies, assembled the largest position in Albemarle Corporation (NYSE:ALB). Renaissance Technologies had $77.4 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also initiated a $15.6 million position during the quarter. The other funds with new positions in the stock are Andrew Casino's Baymount Management, Ken Griffin's Citadel Investment Group, and Peter Muller's PDT Partners.

Let's go over hedge fund activity in other stocks – not necessarily in the same industry as Albemarle Corporation (NYSE:ALB) but similarly valued. These stocks are Rollins, Inc. (NYSE:ROL), Raymond James Financial, Inc. (NYSE:RJF), Ally Financial Inc (NYSE:ALLY), Viatris Inc. (NASDAQ:VTRS), Tradeweb Markets Inc. (NASDAQ:TW), Qualtrics International Inc. (NASDAQ:XM), and Jacobs Engineering Group Inc. (NYSE:J). This group of stocks' market caps are closest to ALB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROL,30,643375,2 RJF,33,749300,-1 ALLY,51,2804131,-6 VTRS,58,1825444,-9 TW,26,311809,-5 XM,37,1247053,37 J,24,995619,-6 Average,37,1225247,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1225 million. That figure was $263 million in ALB's case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand Jacobs Engineering Group Inc. (NYSE:J) is the least popular one with only 24 bullish hedge fund positions. Albemarle Corporation (NYSE:ALB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALB is 43.5. 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. 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 22.8% in 2021 through July 2nd and beat the market by 6 percentage points. A small number of hedge funds were also right about betting on ALB, though not to the same extent, as the stock returned 17.1% since the end of Q1 (through July 2nd) and outperformed the market.

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

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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