The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Alibaba Group Holding Limited (NYSE:BABA) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.
Is Alibaba Group Holding Limited (NYSE:BABA) a healthy stock for your portfolio? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions retreated by 31 recently. Alibaba Group Holding Limited (NYSE:BABA) was in 115 hedge funds’ portfolios at the end of September. The all time high for this statistic is 170. Our calculations also showed that BABA ranked #13 among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 146 hedge funds in our database with BABA positions at the end of the second quarter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a glance at the latest hedge fund action surrounding Alibaba Group Holding Limited (NYSE:BABA).
Ken Fisher of Fisher Asset Management
Do Hedge Funds Think BABA Is A Good Stock To Buy Now?
At Q3’s end, a total of 115 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BABA over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in Alibaba Group Holding Limited (NYSE:BABA), worth close to $2.1039 billion, corresponding to 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $1.992 billion call position; 0.4% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Israel Englander’s Millennium Management, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Polunin Capital allocated the biggest weight to Alibaba Group Holding Limited (NYSE:BABA), around 100% of its 13F portfolio. Joho Capital is also relatively very bullish on the stock, earmarking 19.05 percent of its 13F equity portfolio to BABA.
Seeing as Alibaba Group Holding Limited (NYSE:BABA) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of funds who sold off their full holdings in the third quarter. Interestingly, Cliff Asness’s AQR Capital Management cut the biggest position of all the hedgies watched by Insider Monkey, worth close to $763.4 million in stock. Robert Rodriguez and Steven Romick’s fund, First Pacific Advisors LLC, also said goodbye to its stock, about $217.3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 31 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alibaba Group Holding Limited (NYSE:BABA) but similarly valued. We will take a look at Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), Bank of America Corporation (NYSE:BAC), The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), and ASML Holding N.V. (NASDAQ:ASML). 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 |
|---|---|---|---|
| WMT | 71 | 7932562 | 0 |
| UNH | 95 | 11705313 | -10 |
| BAC | 72 | 46487618 | -15 |
| HD | 58 | 4380170 | -6 |
| MA | 146 | 17659997 | -10 |
| PG | 69 | 6414152 | 1 |
| ASML | 41 | 4858031 | -3 |
| Average | 78.9 | 14205406 | -6.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 78.9 hedge funds with bullish positions and the average amount invested in these stocks was $14205 million. That figure was $10201 million in BABA’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 41 bullish hedge fund positions. Alibaba Group Holding Limited (NYSE:BABA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BABA is 73.5. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, BABA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BABA were disappointed as the stock returned -15% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Alibaba Group Holding Limited (NYSE:BABA)
Follow Alibaba Group Holding Limited (NYSE:BABA)
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Disclosure: None. This article was originally published at Insider Monkey.
