The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity 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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 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.
Alibaba Group Holding Limited (NYSE:BABA) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that BABA is still ranked #4 among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most market participants, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers hone in on the leaders of this group, approximately 850 funds. These hedge fund managers have their hands on the majority of all hedge funds’ total asset base, and by keeping track of their highest performing stock picks, Insider Monkey has uncovered a few investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Stephen Mandel of Lone Pine Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the key hedge fund action encompassing Alibaba Group Holding Limited (NYSE:BABA).
What does smart money think about Alibaba Group Holding Limited (NYSE:BABA)?
Heading into the second quarter of 2020, a total of 167 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. By comparison, 117 hedge funds held shares or bullish call options in BABA a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Alibaba Group Holding Limited (NYSE:BABA), which was worth $2579.7 million at the end of the third quarter. On the second spot was GQG Partners which amassed $1690.5 million worth of shares. Lone Pine Capital, Citadel Investment Group, and Tiger Global Management LLC 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 Serenity Capital allocated the biggest weight to Alibaba Group Holding Limited (NYSE:BABA), around 41.93% of its 13F portfolio. Ovata Capital Management is also relatively very bullish on the stock, designating 36.57 percent of its 13F equity portfolio to BABA.
Seeing as Alibaba Group Holding Limited (NYSE:BABA) has experienced a decline in interest from the smart money, logic holds that there exists a select few funds that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Eashwar Krishnan’s Tybourne Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising about $310.6 million in stock. Simon Sadler’s fund, Segantii Capital, also said goodbye to its stock, about $151.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of 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 Facebook Inc (NASDAQ:FB), Berkshire Hathaway Inc. (NYSE:BRK-B), Visa Inc (NYSE:V), and Johnson & Johnson (NYSE:JNJ). This group of stocks’ market valuations resemble BABA’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FB,213,19600111,15 BRK-B,115,18119296,2 V,157,14390735,14 JNJ,82,5454317,-3 Average,141.75,14391115,7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 141.75 hedge funds with bullish positions and the average amount invested in these stocks was $14391 million. That figure was $19433 million in BABA’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Johnson & Johnson (NYSE:JNJ) is the least popular one with only 82 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately BABA wasn’t nearly as successful as the rest of the top 10 stocks and hedge funds that were betting on BABA were disappointed as the stock returned 2.7% during the same time period and underperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.