Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details.). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Alibaba Group Holding Limited (NYSE:BABA)?
Alibaba Group Holding Limited (NYSE:BABA) has experienced an increase in activity from the world’s largest hedge funds recently. BABA was in 170 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 160 hedge funds in our database with BABA holdings at the end of the previous quarter. Our calculations also showed that BABA ranked 4th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s take a glance at the new hedge fund action surrounding Alibaba Group Holding Limited (NYSE:BABA).
What have hedge funds been doing with Alibaba Group Holding Limited (NYSE:BABA)?
Heading into the first quarter of 2020, a total of 170 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 113 hedge funds held shares or bullish call options in BABA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Alibaba Group Holding Limited (NYSE:BABA), which was worth $2795.6 million at the end of the third quarter. On the second spot was GQG Partners which amassed $1620.9 million worth of shares. Citadel Investment Group, Lone Pine Capital, and Egerton Capital Limited 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 Serenity Capital allocated the biggest weight to Alibaba Group Holding Limited (NYSE:BABA), around 41.24% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, dishing out 29.81 percent of its 13F equity portfolio to BABA.
Now, some big names were leading the bulls’ herd. Steadfast Capital Management, managed by Robert Pitts, initiated the biggest position in Alibaba Group Holding Limited (NYSE:BABA). Steadfast Capital Management had $391.9 million invested in the company at the end of the quarter. Eashwar Krishnan’s Tybourne Capital Management also made a $310.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Frank Brosens’s Taconic Capital, Anthony Bozza’s Lakewood Capital Management, and Howard Marks’s Oaktree Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Alibaba Group Holding Limited (NYSE:BABA). We will take a look at JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), and Walmart Inc. (NYSE:WMT). This group of stocks’ market valuations resemble BABA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JPM | 98 | 13134286 | 4 |
| V | 143 | 16812443 | -4 |
| JNJ | 85 | 8257996 | 1 |
| WMT | 52 | 5252501 | -6 |
| Average | 94.5 | 10864307 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 94.5 hedge funds with bullish positions and the average amount invested in these stocks was $10864 million. That figure was $22443 million in BABA’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 52 bullish hedge fund positions. Compared to these stocks Alibaba Group Holding Limited (NYSE:BABA) is more popular among hedge funds. 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 also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on BABA, though not to the same extent, as the stock returned -0.5% during the first quarter (through March 2nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
