Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Alcon Inc. (NYSE:ALC).
Is Alcon Inc. (NYSE:ALC) a buy right now? Money managers are buying. The number of long hedge fund positions increased by 4 recently. Our calculations also showed that ALC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Roberto Mignone of Bridger Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action encompassing Alcon Inc. (NYSE:ALC).
How have hedgies been trading Alcon Inc. (NYSE:ALC)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALC over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Bridger Management was the largest shareholder of Alcon Inc. (NYSE:ALC), with a stake worth $75.6 million reported as of the end of September. Trailing Bridger Management was Fisher Asset Management, which amassed a stake valued at $69.6 million. Gates Capital Management, Sirios Capital Management, and Citadel Investment Group 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 Bridger Management allocated the biggest weight to Alcon Inc. (NYSE:ALC), around 6.25% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 4.14 percent of its 13F equity portfolio to ALC.
As industrywide interest jumped, specific money managers have jumped into Alcon Inc. (NYSE:ALC) headfirst. Soros Fund Management, managed by George Soros, assembled the biggest position in Alcon Inc. (NYSE:ALC). Soros Fund Management had $31 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $12.7 million investment in the stock during the quarter. The other funds with brand new ALC positions are Krishen Sud’s Sivik Global Healthcare, Noam Gottesman’s GLG Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Alcon Inc. (NYSE:ALC). These stocks are Canon Inc. (NYSE:CAJ), Motorola Solutions Inc (NYSE:MSI), Nokia Corporation (NYSE:NOK), and Zimmer Biomet Holdings Inc (NYSE:ZBH). This group of stocks’ market values are closest to ALC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAJ | 8 | 95141 | 2 |
| MSI | 33 | 932771 | 8 |
| NOK | 23 | 417397 | -1 |
| ZBH | 44 | 1473799 | 2 |
| Average | 27 | 729777 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $730 million. That figure was $482 million in ALC’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Alcon Inc. (NYSE:ALC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ALC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ALC investors were disappointed as the stock returned -5.1% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
