“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Alphabet Inc (NASDAQ:GOOGL).
Alphabet Inc (NASDAQ:GOOGL) was in 146 hedge funds’ portfolios at the end of December. GOOGL has experienced an increase in hedge fund interest of late. There were 137 hedge funds in our database with GOOGL holdings at the end of September. Our calculations also showed that GOOGL isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the key hedge fund action regarding Alphabet Inc (NASDAQ:GOOGL).
How have hedgies been trading Alphabet Inc (NASDAQ:GOOGL)?
At the end of the fourth quarter, a total of 146 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOOGL over the last 14 quarters. 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, Fisher Asset Management held the most valuable stake in Alphabet Inc (NASDAQ:GOOGL), which was worth $1381.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $1127.6 million worth of shares. Moreover, Viking Global, AQR Capital Management, and Diamond Hill Capital were also bullish on Alphabet Inc (NASDAQ:GOOGL), allocating a large percentage of their portfolios to this stock.
Now, some big names have been driving this bullishness. D1 Capital Partners, managed by Daniel Sundheim, initiated the largest position in Alphabet Inc (NASDAQ:GOOGL). D1 Capital Partners had $264.3 million invested in the company at the end of the quarter. Matthew Knauer and Mina Faltas’s Nokota Management also initiated a $143.2 million position during the quarter. The other funds with new positions in the stock are Andrew Hahn’s Ursa Fund Management, James Parsons’s Junto Capital Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.
Let’s go over hedge fund activity in other stocks similar to Alphabet Inc (NASDAQ:GOOGL). These stocks are Alphabet Inc (NASDAQ:GOOG), Berkshire Hathaway Inc. (NYSE:BRK-B), Facebook Inc (NASDAQ:FB), and Alibaba Group Holding Limited (NYSE:BABA). This group of stocks’ market caps resemble GOOGL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOOG | 141 | 12831961 | 11 |
| BRK-B | 87 | 21379350 | 3 |
| FB | 161 | 14869125 | -3 |
| BABA | 113 | 11471017 | -14 |
| Average | 125.5 | 15137863 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 125.5 hedge funds with bullish positions and the average amount invested in these stocks was $15138 million. That figure was $12470 million in GOOGL’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Berkshire Hathaway Inc. (NYSE:BRK-B) is the least popular one with only 87 bullish hedge fund positions. Alphabet Inc (NASDAQ:GOOGL) is not the most popular stock in this group but hedge fund interest is still extremely high as GOOGL is one of the top 15 most popular stocks among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on GOOGL as the stock returned 13.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
