The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Alibaba Group Holding Limited (NYSE:BABA) based on those filings.
Is Alibaba Group Holding Limited (NYSE:BABA) a buy, sell, or hold? The smart money was selling. The number of bullish hedge fund positions fell by 10 lately. Alibaba Group Holding Limited (NYSE:BABA) was in 156 hedge funds’ portfolios at the end of December. The all time high for this statistic is 170. Our calculations also showed that BABA ranked #6 among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now we’re going to take a peek at the recent hedge fund action surrounding Alibaba Group Holding Limited (NYSE:BABA).
Do Hedge Funds Think BABA Is A Good Stock To Buy Now?
At the end of December, a total of 156 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the third quarter of 2020. On the other hand, there were a total of 170 hedge funds with a bullish position in BABA a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Alibaba Group Holding Limited (NYSE:BABA). Fisher Asset Management has a $3.2456 billion position in the stock, comprising 2.4% of its 13F portfolio. The second most bullish fund manager is Tiger Global Management LLC, led by Chase Coleman, holding a $1.0422 billion position; 2.7% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions contain Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to Alibaba Group Holding Limited (NYSE:BABA), around 30% of its 13F portfolio. Joho Capital is also relatively very bullish on the stock, designating 29.98 percent of its 13F equity portfolio to BABA.
Seeing as Alibaba Group Holding Limited (NYSE:BABA) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers that decided to sell off their full holdings by the end of the fourth quarter. It’s worth mentioning that Rajiv Jain’s GQG Partners dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $2820.6 million in stock, and Lei Zhang’s Hillhouse Capital Management was right behind this move, as the fund sold off about $1188.3 million worth. These transactions are important to note, as total hedge fund interest fell by 10 funds by the end of the fourth quarter.
Let’s now review hedge fund activity in other stocks similar to Alibaba Group Holding Limited (NYSE:BABA). These stocks are Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), JPMorgan Chase & Co. (NYSE:JPM), and Mastercard Incorporated (NYSE:MA). This group of stocks’ market caps match BABA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSM | 72 | 11843403 | 5 |
| BRK-B | 110 | 20795968 | 1 |
| V | 166 | 23599162 | 6 |
| JNJ | 81 | 5820696 | -1 |
| WMT | 70 | 6197019 | 1 |
| JPM | 112 | 6967178 | -6 |
| MA | 154 | 17978734 | 21 |
| Average | 109.3 | 13314594 | 3.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 109.3 hedge funds with bullish positions and the average amount invested in these stocks was $13315 million. That figure was $17892 million in BABA’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 70 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 94.5. 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 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 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately BABA wasn’t nearly as successful as these 30 stocks and hedge funds that were betting on BABA were disappointed as the stock returned 0.9% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Alibaba Group Holding Limited (NYSE:BABA)
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Disclosure: None. This article was originally published at Insider Monkey.
