After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Align Technology, Inc. (NASDAQ:ALGN).
Is ALGN stock a buy or sell? Align Technology, Inc. (NASDAQ:ALGN) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ALGN investors should be aware of an increase in hedge fund interest lately. There were 47 hedge funds in our database with ALGN positions at the end of the third quarter. Our calculations also showed that ALGN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gabriel Plotkin of Melvin Capital Management
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). Now we’re going to analyze the fresh hedge fund action surrounding Align Technology, Inc. (NASDAQ:ALGN).
Do Hedge Funds Think ALGN Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALGN over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Bares Capital Management was the largest shareholder of Align Technology, Inc. (NASDAQ:ALGN), with a stake worth $429.9 million reported as of the end of December. Trailing Bares Capital Management was Renaissance Technologies, which amassed a stake valued at $317.7 million. Viking Global, Fisher Asset Management, and Melvin Capital Management 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 Bares Capital Management allocated the biggest weight to Align Technology, Inc. (NASDAQ:ALGN), around 7.95% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, designating 1.89 percent of its 13F equity portfolio to ALGN.
Consequently, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Align Technology, Inc. (NASDAQ:ALGN). Balyasny Asset Management had $21.1 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $2.5 million position during the quarter. The other funds with brand new ALGN positions are Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks similar to Align Technology, Inc. (NASDAQ:ALGN). These stocks are Electronic Arts Inc. (NASDAQ:EA), National Grid plc (NYSE:NGG), Unity Software Inc. (NYSE:U), DocuSign, Inc. (NASDAQ:DOCU), Moderna, Inc. (NASDAQ:MRNA), American Electric Power Company, Inc. (NASDAQ:AEP), and Veeva Systems Inc (NYSE:VEEV). This group of stocks’ market values are closest to ALGN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EA | 50 | 1050954 | -12 |
| NGG | 5 | 352676 | -1 |
| U | 32 | 11908726 | -3 |
| DOCU | 67 | 4232054 | 5 |
| MRNA | 41 | 1479400 | 9 |
| AEP | 32 | 331817 | 2 |
| VEEV | 36 | 884354 | -2 |
| Average | 37.6 | 2891426 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $2891 million. That figure was $2481 million in ALGN’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 5 bullish hedge fund positions. Align Technology, Inc. (NASDAQ:ALGN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALGN is 74.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately ALGN wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ALGN were disappointed as the stock returned -0.9% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Align Technology Inc (NASDAQ:ALGN)
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Disclosure: None. This article was originally published at Insider Monkey.
