Here’s Likely Why Alibaba Group Holding Limited (BABA) Is In Decline
How do you choose the next stock to invest in? One way would be to spend days researching through thousands of publicly traded companies. However, an easier way is to look at stocks that smart investors are collectively bullish on. Hedge funds and other institutional investors typically invest large amounts of capital and should exercise due diligence when choosing their next choice. They don’t always make the right choices, 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 recent hedge fund activity around Alibaba Group Holding Limited (NYSE:BABA).
Is Alibaba Group Holding Limited (NYSE:BABA) soon ready to rally? Fund managers were becoming less optimistic. The number of long positions in hedge funds has fallen by 21 in recent months. Alibaba Group Holding Limited (NYSE:BABA) was in 135 hedge fund portfolios at the end of the first quarter of 2021. The all-time high for this statistic is 170. Our calculations also showed that BABA ranked 9th among 30 most popular stocks among hedge funds (click for Q1 ranking). There were 156 hedge funds in our database with BABA holdings at the end of December.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Hedge funds have over $ 3.5 trillion in assets under management, so you can’t expect all of their portfolios to beat the market with significant margins. Our research identified in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 115 percentage points since March 2017 (see details here). So you can still find a lot of gems by following the movements of hedge funds today.
Scott Ferguson of Sachem Head Capital
At Insider Monkey, we leave no stone unturned when we research the next big investment idea. For example, lithium mining is one of the fastest growing industries right now, so we’re looking at stock locations like this. emerging lithium stocks. We’re going through lists like the Top 10 Hydrogen Fuel Cell Stocks to pick the next Tesla that will deliver 10x efficiency. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to market arguments at hedge fund conferences. You can subscribe to our free daily newsletter at our home page. With that in mind, let’s take a look at the key hedge fund action regarding Alibaba Group Holding Limited (NYSE:BABA).
Do hedge funds think BABA is a good stock to buy now?
At the end of the first quarter, a total of 135 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2020. The graph below shows the number of hedge funds with a bullish position on BABA. over the past 23 quarters. With the change of hands of speculative capital, there is a “next level” of key hedge fund managers who were building up their holdings significantly (or already building up significant positions).
According to public data on hedge funds and institutional investor holdings compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management holds the most valuable position in Alibaba Group Holding Limited (NYSE: BABA), worth nearly $ 3. , $ 1519 billion, or 2.2% of its total Portfolio 13F. Citadel Investment Group, led by Ken Griffin, is in second place and has a buy position of $ 2.3696 billion; 0.6% of its 13F portfolio is allocated to society. Other hedge funds and institutional investors who hold long positions contain the Rokos Capital Management, Tiger Global Management LLC of Chase Coleman and Millennium Management of Israel Englander. In terms of the portfolio weights assigned to each position, Portland Hill Asset Management assigned the largest weight to Alibaba Group Holding Limited (NYSE: BABA), approximately 21.24% of its 13F portfolio. Joho Capital is also relatively very bullish on the stock, designating 20.1% of its 13F equity portfolio to BABA.
Given that Alibaba Group Holding Limited (NYSE: BABA) has seen a decline in interest from the global hedge fund industry, it’s easy to see that there is a cult of hedge funds that have sold out entirely. their positions before the second quarter. Oddly enough, Dan Loeb is Third point scrapped the biggest investment in the “top crust” of funds monitored by Insider Monkey, valued at nearly $ 325.8 million in stocks. the Robert Pitts fund, Constant capital management, also sold its shares, valued at approximately $ 293.4 million. These moves are interesting, as total hedge fund interest was reduced by 21 funds before the second quarter.
Let’s 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), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT) and Mastercard Incorporated (NYSE:MY). The market valuations of this group of stocks resemble the market valuation of BABA.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF TSM position, 76.10870661.4 BRK-B, 111.19880791.1 JPM, 111.5253689, -1 V, 164.26588103 , -2 JNJ, 81.6913373.0 WMT, 58.5881223, -12 MA, 151.17097200, -3 Medium, 107.4,13212149, -1.9 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 107.4 hedge funds with bullish positions and the average amount invested in these stocks was $ 13,212 million. That figure was $ 15,498 million in the case of BABA. Visa Inc (NYSE:V) is the most popular action in this table. On the other hand, Walmart Inc. (NYSE:WMT) is the least popular with only 58 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 82.1. Stocks with a 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 prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations have shown 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 17.2% in 2021 through June 11 and again beat the market by 3.3 percentage points. Unfortunately, BABA was not as popular as these 5 stocks and the hedge funds that bet on BABA were disappointed as the stock returned -6.7% since the end of March (through 6/11) and has under- performed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Monkey initiate.