Were Hedge Funds Right About Alphabet Inc (GOOGL)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Alphabet Inc (NASDAQ:GOOGL) and determine whether hedge funds skillfully traded this stock.

Alphabet Inc (NASDAQ:GOOGL) investors should be aware of an increase in hedge fund interest of late. Alphabet Inc (NASDAQ:GOOGL) was in 195 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 190. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 190 hedge funds in our database with GOOGL positions at the end of the second quarter. Our calculations also showed that GOOGL ranked #4 among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 peek at the key hedge fund action surrounding Alphabet Inc (NASDAQ:GOOGL).

Ken Fisher of Fisher Asset Management

Do Hedge Funds Think GOOGL Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 195 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOOGL over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Alphabet Inc (NASDAQ:GOOGL), which was worth $5812.8 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $4912.5 million worth of shares. TCI Fund Management, Arrowstreet Capital, and AQR 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 Fosse Capital Partners allocated the biggest weight to Alphabet Inc (NASDAQ:GOOGL), around 30.86% of its 13F portfolio. Immersion Capital is also relatively very bullish on the stock, setting aside 21.41 percent of its 13F equity portfolio to GOOGL.

As aggregate interest increased, key hedge funds have been driving this bullishness. Harvard Management Co, managed by Rick Slocum, created the most outsized position in Alphabet Inc (NASDAQ:GOOGL). Harvard Management Co had $163.3 million invested in the company at the end of the quarter. Jason McDougall’s 11 Capital Partners also made a $40.1 million investment in the stock during the quarter. The other funds with brand new GOOGL positions are Paul Tudor Jones’s Tudor Investment Corp, Benjamin A. Smith’s Laurion Capital Management, and Steven Boyd’s Armistice Capital.

Let’s now review hedge fund activity in other stocks similar to Alphabet Inc (NASDAQ:GOOGL). We will take a look at Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Berkshire Hathaway Inc. (NYSE:BRK-B), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), NVIDIA Corporation (NASDAQ:NVDA), and JPMorgan Chase & Co. (NYSE:JPM). This group of stocks’ market valuations match GOOGL’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 129.6 hedge funds with bullish positions and the average amount invested in these stocks was $19490 million. That figure was $28555 million in GOOGL’s case. Meta Platforms, Inc. (NASDAQ:FB) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 60 bullish hedge fund positions. Alphabet Inc (NASDAQ:GOOGL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GOOGL is 92.9. 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. 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 still beat the market by 3.6 percentage points. Hedge funds were also somewhat right about betting on GOOGL as the stock returned 1.2% since the end of Q3 (through 1/31) and outperformed the top 5 hedge fund stocks but not the market. This rarely happens because top 5 hedge fund stocks usually outperform the market.

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Disclosure: None. This article was originally published at Insider Monkey.