How do you choose the next stock to invest? One way would be to spend days researching browsing thousands of publicly traded companies. However, an easier way is to look for stocks that smart money investors are collectively optimistic about. Hedge funds and other institutional investors generally invest large amounts of capital and need to conduct due diligence when choosing their next choice. They do not always get it right, but, on average, their stock choices have historically generated strong returns after adjusting for known risk factors. With that in mind, let’s take a look at the recent hedge fund activity around Alibaba Group Holding Limited (NYSE: BABA).
Are Alibaba (BABA) shares a buy or sell? Well-informed investors were reducing their exposure. The number of hedge fund optimistic positions has decreased by 10 in the past few months. Alibaba Group Holding Limited (NYSE: BABA) was in 156 hedge fund portfolios at the end of the fourth quarter of 2020. The historical maximum for this statistic is 170. Our calculations also showed that BABA was still in 7th place out of 30 most popular stocks among hedge funds (click to view fourth quarter ratings).
David Blood of Generation Investment Management
At Insider Monkey, we leave no stone unturned when looking for the next big investment idea. For example, lithium mining is one of the fastest growing industries at the moment, so we are looking at proposals for actions like this emerging lithium stock. We looked at lists like the top 10 hydrogen fuel cell stocks to choose the next Tesla that will provide a 10-fold return. Although we recommend positions in only a small fraction of the companies we analyze, we check as many shares as we can. We read letters from hedge fund investors and heard stock presentations at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With that in mind, let’s take a look at the latest hedge fund stocks covering Alibaba Group Holding Limited (NYSE: BABA).
Do hedge funds think BABA is a good stock to buy now?
At the end of the fourth quarter, a total of 156 of the hedge funds monitored by Insider Monkey were purchased with these shares, a variation of -6% compared to the third quarter of 2020. Below, you can see the change in the sentiment of the funds. hedge in relation to BABA in relation to the last 22 quarters. With the hedge positions in their usual ebbs and flows, there is a select group of notable hedge fund managers who were increasing their holdings considerably (or had already accumulated large positions).
The largest stake in Alibaba Group Holding Limited (NYSE: BABA) was held by Fisher Asset Management, which reported having $ 3245.6 million in shares at the end of December. He was followed by Tiger Global Management LLC with a position of $ 1,042.2 million. Other investors optimistic about the company include Millennium Management, AQR Capital Management and Soroban Capital Partners. In terms of portfolio weights assigned to each position, Serenity Capital attributed the greatest weight to Alibaba Group Holding Limited (NYSE: BABA), about 30% of its 13F portfolio. Joho Capital is also relatively optimistic about the shares, reserving 29.98% of its 13F share portfolio to BABA.
Seeing how Alibaba Group Holding Limited (NYSE: BABA) faced a downward sentiment in all the hedge funds we tracked, it is easy to see that there is a select group of funds that were leaving their positions entirely for the first quarter. It is worth mentioning that Rajiv Jain’s GQG Partners cut the largest share of all hedgies assisted by Insider Monkey, totaling around $ 2,820.6 million in shares. Lei Zhang’s fund, Hillhouse Capital Management, also cut its shares, worth about $ 1,188.3 million. These bearish behaviors are interesting, as hedge fund total interest fell by 10 funds in the first quarter.
We will look at hedge fund activity in other stocks – not necessarily in the same sector as Alibaba Group Holding Limited (NYSE: BABA), but with a similar value. These shares are Facebook Inc (NASDAQ: FB), Visa Inc (NYSE: V), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Berkshire Hathaway Inc. (NYSE: BRK-B), Tesla Inc. (NASDAQ: TSLA), Walmart Inc. (NYSE: WMT) and Johnson & Johnson (NYSE: JNJ). All market values of these shares correspond to the market value of BABA.
[table] Ticker, number of HFs with positions, total value of HF positions (x1000), change in HF FB position, 242.38233910.12 V, 166.23599162.6 TSM, 72.11843403.5 BRK-B, 110, 20795968, 1 TSLA, 68.12308025.1 WMT, 70.6197019.1 JNJ, 81.5820696, -1 Average, 115.6.16971169.3.6 [/table]
See the table here if you have formatting problems.
As you can see, these shares averaged 115.6 hedge funds with optimistic positions and the average amount invested in these shares was $ 16971 million. That number was $ 17,892 million in the case of BABA. Facebook Inc (NASDAQ: FB) is the most popular share on this table. On the other hand, Tesla Inc. (NASDAQ: TSLA) is the least popular, with only 68 high hedge fund positions. Alibaba Group Holding Limited (NYSE: BABA) is not the most popular stock in that group, but interest on hedge funds is still above average. Our overall hedge fund sentiment score for BABA is 76.8. Shares with the highest number of hedge fund positions in relation to other shares, as well as in relation to their historical range, receive a higher sentiment score. This is a slightly positive sign, but we prefer to spend our time researching stocks that hedge funds are accumulating. Our calculations showed that the 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 shares gained 7% in 2021 through March 12 and outperformed the market again by 1.6 percentage points. Unfortunately, BABA was not as successful as those 30 stocks and hedge funds that were betting on BABA were disappointed with the -0.4% return on shares since the end of December (until 3/12) and a performance lower than the market. If you are interested in investing in large-cap stocks with great appreciation potential, check out the most diverse list of the 30 most popular stocks among hedge funds, as many of these stocks have outperformed the market since 2019.
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Disclosure: None. This article was originally published on Insider Monkey.
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