Tesla Motors Inc (TSLA), Alibaba Group Holding Ltd (BABA), BlackBerry Ltd (BBRY), Netflix, Inc. (NFLX): Which Stock Quants Like The Most?

In a yesterday article we analyzed four stocks, Apple, Facebook, Amazon, and Alphabet, from the perspective of six quantitative hedge funds. Since, quantitative hedge funds have outperformed their peers in the last few quarters and are generally performing much better than the broader market, we have decided to take a look at how quants feel about four other technology stocks: Tesla Motors Inc (NASDAQ:TSLA), Alibaba Group Holding Ltd (NYSE:BABA), BlackBerry Ltd (NASDAQ:BBRY), and Netflix, Inc. (NASDAQ:NFLX).

To analyze these stocks, we have selected five funds: Cliff Asness’ AQR Capital Management, David E. Shaw’s D. E. Shaw & Co., Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel Two Sigma Advisors, and Jim Simons’ Renaissance Technologies. The funds in question are called quantitative hedge funds, or quants for short. Following quants and imitating some of their stock picks can prove to be a more successful strategy than following other smart money investors, because these funds use mainly an algorithmic and/or systematic approach to identify investment opportunities and their strategy is based mainly on fundamental analysis and many quants have some degree of automation in their activity. Our analysis show that these five funds in particular stand out in the larger crowd of some 730 investors that we track due to their superior returns. For example, our bactests of Renaissance Technologies‘ equity portfolio between 2008 and 2012, showed that its top five holdings in large-cap stocks returned 1.17% per month and it had an alpha of just 103 basis points, which shows that not only RenTech’s equity portfolio managed to beat the S&P 500, which inched up by 0.29% per month during the same period, but also its picks were less risky.

The aforementioned stocks, Tesla Motors Inc (NASDAQ:TSLA), Alibaba Group Holding Ltd (NYSE:BABA), BlackBerry Ltd (NASDAQ:BBRY), and Netflix, Inc. (NASDAQ:NFLX), were included in the equity portfolios of the majority of the five quantitative hedge funds, although there’s only one stock in which all funds held shares heading into the fourth quarter. Moreover, two of the funds aside from holding shares of these companies also reported ownership of ‘Call’ and ‘Put’ options, but we have excluded these positions from the discussion. Having said that, let’s take a closer look how quants traded these stocks during the third quarter and see the general smart money sentiment towards each one of them.

It’s safe to say that Tesla Motors Inc (NASDAQ:TSLA), one of the top 10 luxury car brands in the World, is the least popular stock in this list among the quants we selected. Only three out of the five funds own shares of the company as of the end of September, and even though two of them increased their stakes during the third quarter, all three funds own relatively small amounts of shares. The largest stake is held by Citadel Investment Group, which held 81,197 shares heading into the fourth quarter, down by 22% over the quarter. The other two funds, AQR Capital Management and D. E. Shaw & Co. increased their stakes by 28% and 58% on the quarter to 3,541 shares and 15,978 shares, respectively. Tesla Motors Inc (NASDAQ:TSLA) may be a brilliant company from the technological standpoint, but at its current valuation many funds consider its stock overvalued, which explains why it doesn’t enjoy a strong support from quants. Overall, smart money is also not very excited about Tesla Motors Inc (NASDAQ:TSLA), as just 34 funds from our database held around 4% of its outstanding stock at the end of September.

In Alibaba Group Holding Ltd (NYSE:BABA) also just three quants held long positions at the end of the third quarter, with RenTech and Two Sigma Advisors having chosen to stay away from the stock. Among the other three funds, AQR Capital Management owns the largest stake, which contains 3.58 million shares as of the end of September, up by 48% over the quarter. It is followed by Citadel Investment Group, which trimmed its position in Alibaba Group Holding Ltd (NYSE:BABA) by 24% to 1.82 million shares. On the other hand, D. E. Shaw boosted its stake by 477% to 205,500 shares. Alibaba Group Holding Ltd (NYSE:BABA) is also by far the most popular stock among all investors tracked by us, with 104 of them holding shares as of the end of September, which is significantly higher than 69 funds a quarter earlier.

Then there’s BlackBerry Ltd (NASDAQ:BBRY), which is the only stock in this article, in which all five funds held shares at the end of September and four of them increased their stakes during the third quarter. Renaissance Technologies, which owns just Blackberry out of all four stocks we have selected, is also the largest shareholder, as it owns 18.78 million shares as of the end of September, up by 17% over the quarter. It was followed by D. E. Shaw & Co, which increased its stake by 51% to 3.42 million shares during the third quarter, and Citadel Investment Group, which added 1.08 million shares of BlackBerry Ltd (NASDAQ:BBRY) during the quarter and held 1.45 million shares at the end of September. On the other hand, AQR Capital Management is the only fund that cut its stake by 31% to 1.22 million shares. Finally, Two Sigma Advisors, raised its position in BlackBerry Ltd (NASDAQ:BBRY) by 36% to 168,126 shares. However, with a total of 23 funds from our database long its stock at the end of September, BlackBerry is the least popular stock among all funds in our database.

Netflix, Inc. (NASDAQ:NFLX) also saw just three out of the four quants holding shares, although their stakes are also quite modest. The largest position was disclosed by D. E. Shaw, which initiated a stake during the third quarter and held 327,531 shares at the end of September. Citadel Investment Group increased its position by 38% to 150,848 shares, while AQR Capital Management unloaded 49% of its holding and reported ownership of just 17,850 shares as of the end of September. On the other hand, Renaissance Technologies and Two Sigma Advisors had unloaded their entire stakes earlier this year. Overall, among smart money investors we track, Netflix, Inc. (NASDAQ:NFLX) is more popular than Blackberry and Tesla, but it’s much less popular than Alibaba, having registered 55 funds with long positions at the end of September.

Overall, it looks like quants are not particularly enthusiastic about neither of these four stocks. To identify the reasons behind their sentiment more analysis is required. However, if we had to pick two stocks from the list, subjectively, we believe that Blackberry Ltd (NASDAQ:BBRY) and Alibaba Group Holding Ltd. (NYSE:BABA) deserve more attention.

Disclosure: none