Hedge Funds Have Never Been This Bullish On Align Technology, Inc. (ALGN)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Align Technology, Inc. (NASDAQ:ALGN) changed recently.

Is Align Technology, Inc. (NASDAQ:ALGN) worth your attention right now? The best stock pickers were getting more bullish. The number of bullish hedge fund bets rose by 8 lately. Align Technology, Inc. (NASDAQ:ALGN) was in 57 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ALGN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a lot of methods stock traders employ to size up stocks. A duo of the most innovative methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best money managers can trounce their index-focused peers by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Gabriel Plotkin of Melvin 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 let’s check out the recent hedge fund action encompassing Align Technology, Inc. (NASDAQ:ALGN).

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

Heading into the third quarter of 2021, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 41 hedge funds with a bullish position in ALGN a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Gabriel Plotkin’s Melvin Capital Management has the most valuable position in Align Technology, Inc. (NASDAQ:ALGN), worth close to $386.2 million, amounting to 2.2% of its total 13F portfolio. The second most bullish fund manager is Brian Bares of Bares Capital Management, with a $378.8 million position; 6.7% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Ken Fisher’s Fisher Asset Management, Andreas Halvorsen’s Viking Global and Gabriel Plotkin’s Melvin Capital Management. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Align Technology, Inc. (NASDAQ:ALGN), around 6.74% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 4.09 percent of its 13F equity portfolio to ALGN.

As aggregate interest increased, some big names have jumped into Align Technology, Inc. (NASDAQ:ALGN) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, created the biggest call position in Align Technology, Inc. (NASDAQ:ALGN). Melvin Capital Management had $213.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $43.6 million investment in the stock during the quarter. The following funds were also among the new ALGN investors: Leon Shaulov’s Maplelane Capital, Larry Chen and Terry Zhang’s Tairen Capital, and Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Align Technology, Inc. (NASDAQ:ALGN). These stocks are Monster Beverage Corp (NASDAQ:MNST), eBay Inc (NASDAQ:EBAY), Marvell Technology, Inc. (NASDAQ:MRVL), Vodafone Group Plc (NASDAQ:VOD), Veeva Systems Inc (NYSE:VEEV), Dow Inc. (NYSE:DOW), and Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG). All of these stocks’ market caps match ALGN’s market cap.

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As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1379 million. That figure was $2690 million in ALGN’s case. Marvell Technology, Inc. (NASDAQ:MRVL) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Align Technology, Inc. (NASDAQ:ALGN) is more popular among hedge funds. Our overall hedge fund sentiment score for ALGN is 90. 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 returned 25.7% in 2021 through September 27th but still managed to beat the market by 6.2 percentage points. Hedge funds were also right about betting on ALGN as the stock returned 14.7% since the end of June (through 9/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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