Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the elite funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Alibaba Group Holding Ltd (NYSE:BABA).
Is Alibaba Group Holding Ltd (NYSE:BABA) a healthy stock for your portfolio? Hedge funds seem to think so as the number of bullish hedge funds surged by 35 lately and BABA was included in the portfolios of 104 funds from our database at the end of the third quarter of 2016. However, it’s important to mention that the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Novartis AG (ADR) (NYSE:NVS), The Coca-Cola Company (NYSE:KO), and Oracle Corporation (NASDAQ:ORCL) to gather more data points.
Follow Alibaba Group Holding Limited (NYSE:BABA)
Follow Alibaba Group Holding Limited (NYSE:BABA)
To the average investor there are several signals investors put to use to size up publicly traded companies. A duo of the less utilized signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best money managers can outclass the broader indices by a significant margin (see the details here).
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With all of this in mind, we’re going to take a peek at the recent action encompassing Alibaba Group Holding Ltd (NYSE:BABA).
Hedge fund activity in Alibaba Group Holding Ltd (NYSE:BABA)
Heading into the fourth quarter of 2016, a total of 104 of the hedge funds tracked by Insider Monkey were long this stock, up by 51% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Silver Lake Partners, managed by Jim Davidson, Dave Roux, and Glenn Hutchins, holds the biggest position in Alibaba Group Holding Ltd (NYSE:BABA). Silver Lake Partners has a $859.5 million position in the stock, comprising 17.8% of its 13F portfolio. Sitting at the No. 2 spot is Chase Coleman of Tiger Global Management LLC, with a $568.5 million position; the fund has 8.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Stephen Mandel’s Lone Pine Capital, Cliff Asness’s AQR Capital Management and Ken Fisher’s Fisher Asset Management.
As aggregate interest increased, specific money managers have jumped into Alibaba Group Holding Ltd (NYSE:BABA) headfirst. Tiger Global Management LLC, managed by Chase Coleman, initiated the most outsized position in Alibaba Group Holding Ltd (NYSE:BABA). Tiger Global Management LLC had $568.5 million invested in the company at the end of the quarter. Stephen Mandel’s Lone Pine Capital also initiated a $545 million position during the quarter. The other funds with new positions in the stock are Philippe Laffont’s Coatue Management, Dan Loeb’s Third Point, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alibaba Group Holding Ltd (NYSE:BABA), but similarly valued. These stocks are Novartis AG (ADR) (NYSE:NVS), The Coca-Cola Company (NYSE:KO), Oracle Corporation (NASDAQ:ORCL), and Fomento Economico Mexicano SAB (ADR) (NYSE:FMX). This group of stocks’ market caps are closest to BABA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVS | 26 | 914753 | 4 |
| KO | 53 | 19569276 | -2 |
| ORCL | 56 | 5840268 | 3 |
| FMX | 16 | 207760 | 1 |
As you can see these stocks had an average of 38 funds with bullish positions and the average amount invested in these stocks was $6.63 billion, which is lower compared to the $8.27 billion in Alibaba’s case. Oracle Corporation (NASDAQ:ORCL) is the most popular stock in this table, with 56 funds holding shares. On the other hand Fomento Economico Mexicano SAB (ADR) (NYSE:FMX) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks, Alibaba Group Holding Ltd (NYSE:BABA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
