Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Altaba Inc. (NASDAQ:AABA).
Altaba Inc. (NASDAQ:AABA) was in 59 hedge funds’ portfolios at the end of the second quarter of 2019. AABA investors should be aware of a decrease in enthusiasm from smart money recently. There were 76 hedge funds in our database with AABA holdings at the end of the previous quarter. Our calculations also showed that AABA isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action surrounding Altaba Inc. (NASDAQ:AABA).
How have hedgies been trading Altaba Inc. (NASDAQ:AABA)?
Heading into the third quarter of 2019, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the first quarter of 2019. On the other hand, there were a total of 95 hedge funds with a bullish position in AABA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Thomas Steyer’s Farallon Capital has the biggest position in Altaba Inc. (NASDAQ:AABA), worth close to $1.9675 billion, comprising 16.3% of its total 13F portfolio. On Farallon Capital’s heels is Jeffrey Altman of Owl Creek Asset Management, with a $1.4239 billion position; 47.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish comprise Robert Henry Lynch’s Aristeia Capital, David Costen Haley’s HBK Investments and Israel Englander’s Millennium Management.
Since Altaba Inc. (NASDAQ:AABA) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that slashed their entire stakes in the second quarter. Interestingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. dropped the largest stake of the 750 funds followed by Insider Monkey, worth about $767.2 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund said goodbye to about $590.6 million worth. These moves are important to note, as aggregate hedge fund interest fell by 17 funds in the second quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Altaba Inc. (NASDAQ:AABA) but similarly valued. These stocks are SYSCO Corporation (NYSE:SYY), Cognizant Technology Solutions Corporation (NASDAQ:CTSH), Mizuho Financial Group Inc. (NYSE:MFG), and Occidental Petroleum Corporation (NYSE:OXY). This group of stocks’ market caps are similar to AABA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYY | 31 | 2706154 | -5 |
| CTSH | 33 | 2283082 | -11 |
| MFG | 6 | 22357 | 4 |
| OXY | 42 | 2688402 | 7 |
| Average | 28 | 1924999 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1925 million. That figure was $13835 million in AABA’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Altaba Inc. (NASDAQ:AABA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks (see the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AABA, though not to the same extent, as the stock returned 3% during the third quarter and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
