Alibaba Group Holding Limited (BABA): Are Hedge Funds Right About This Stock?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Alibaba Group Holding Limited (NYSE:BABA).

Alibaba Group Holding Limited (NYSE:BABA) investors should be aware of an increase in enthusiasm from smart money of late. Alibaba Group Holding Limited (NYSE:BABA) was in 146 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 170. There were 135 hedge funds in our database with BABA positions at the end of the first quarter. Our calculations also showed that BABA ranked 8th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a peek at the fresh hedge fund action regarding Alibaba Group Holding Limited (NYSE:BABA).

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

At Q2’s end, a total of 146 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BABA over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Alibaba Group Holding Limited (NYSE:BABA) was held by Fisher Asset Management, which reported holding $3204.3 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $2091.8 million position. Other investors bullish on the company included Millennium Management, Rokos Capital Management, and Tiger Global Management LLC. In terms of the portfolio weights assigned to each position Polunin Capital allocated the biggest weight to Alibaba Group Holding Limited (NYSE:BABA), around 34.61% of its 13F portfolio. Mohnish Pabrai is also relatively very bullish on the stock, earmarking 21.13 percent of its 13F equity portfolio to BABA.

As aggregate interest increased, some big names have jumped into Alibaba Group Holding Limited (NYSE:BABA) headfirst. GQG Partners, managed by Rajiv Jain, established the most valuable position in Alibaba Group Holding Limited (NYSE:BABA). GQG Partners had $753.2 million invested in the company at the end of the quarter. Douglas Harold Hart Polunin’s Polunin Capital also made a $112.1 million investment in the stock during the quarter. The other funds with brand new BABA positions are Chris Rokos’s Rokos Capital Management, Simon Sadler’s Segantii Capital, and Marcio Appel’s Adam Capital.

Let’s now review 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 Visa Inc (NYSE:V), NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), and Mastercard Incorporated (NYSE:MA). This group of stocks’ market caps are closest to BABA’s market cap.

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As you can see these stocks had an average of 110.9 hedge funds with bullish positions and the average amount invested in these stocks was $12424 million. That figure was $16794 million in BABA’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 71 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 90. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately BABA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BABA were disappointed as the stock returned -33.2% since the end of June (through 9/20) and underperformed the market. If you are interested in investing 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 already outperformed the market since 2019.

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