Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Alignment Healthcare, Inc. (NASDAQ:ALHC).
Is ALHC a good stock to buy? Prominent investors were betting on the stock. The number of bullish hedge fund bets improved by 17 recently. Alignment Healthcare, Inc. (NASDAQ:ALHC) was in 17 hedge funds’ portfolios at the end of March. Our calculations also showed that ALHC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ole Andreas Halvorsen of Viking Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind we’re going to go over the key hedge fund action regarding Alignment Healthcare, Inc. (NASDAQ:ALHC).
Do Hedge Funds Think ALHC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17 from the fourth quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in ALHC 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, Sectoral Asset Management held the most valuable stake in Alignment Healthcare, Inc. (NASDAQ:ALHC), which was worth $23.1 million at the end of the fourth quarter. On the second spot was OrbiMed Advisors which amassed $17.5 million worth of shares. Millennium Management, Viking Global, and Holocene Advisors 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 Sectoral Asset Management allocated the biggest weight to Alignment Healthcare, Inc. (NASDAQ:ALHC), around 1.75% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to ALHC.
Consequently, key money managers were breaking ground themselves. Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, established the most outsized position in Alignment Healthcare, Inc. (NASDAQ:ALHC). Sectoral Asset Management had $23.1 million invested in the company at the end of the quarter. OrbiMed Advisors also initiated a $17.5 million position during the quarter. The other funds with brand new ALHC positions are Israel Englander’s Millennium Management, Andreas Halvorsen’s Viking Global, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Alignment Healthcare, Inc. (NASDAQ:ALHC). We will take a look at Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), The Goodyear Tire & Rubber Company (NASDAQ:GT), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Hudson Pacific Properties Inc (NYSE:HPP), ONE Gas Inc (NYSE:OGS), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and JFrog Ltd. (NASDAQ:FROG). This group of stocks’ market values resemble ALHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBRL | 16 | 163644 | -10 |
| GT | 23 | 429776 | -4 |
| PPBI | 10 | 139882 | 0 |
| HPP | 16 | 105147 | -6 |
| OGS | 13 | 28456 | 1 |
| TKC | 8 | 28943 | 4 |
| FROG | 20 | 235381 | 4 |
| Average | 15.1 | 161604 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $94 million in ALHC’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 8 bullish hedge fund positions. Alignment Healthcare, Inc. (NASDAQ:ALHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALHC is 58. 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 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 gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately ALHC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALHC were disappointed as the stock returned -7.4% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Alignment Healthcare Inc.
Follow Alignment Healthcare Inc.
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Disclosure: None. This article was originally published at Insider Monkey.