Here is What Hedge Funds Think About Alcon Inc. (ALC)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Alcon Inc. (NYSE:ALC).

Alcon Inc. (NYSE:ALC) has experienced a decrease in support from the world’s most elite money managers in recent months. Alcon Inc. (NYSE:ALC) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 26. There were 24 hedge funds in our database with ALC positions at the end of the fourth quarter. Our calculations also showed that ALC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Roberto Mignone of Bridger Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now let’s review the recent hedge fund action regarding Alcon Inc. (NYSE:ALC).

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

At first quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in ALC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Alcon Inc. (NYSE:ALC) was held by Ako Capital, which reported holding $440.1 million worth of stock at the end of December. It was followed by Sirios Capital Management with a $72.4 million position. Other investors bullish on the company included Bridger Management, Fisher Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Sirios Capital Management allocated the biggest weight to Alcon Inc. (NYSE:ALC), around 6.1% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, dishing out 5.44 percent of its 13F equity portfolio to ALC.

Seeing as Alcon Inc. (NYSE:ALC) has witnessed declining sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. Intriguingly, OrbiMed Advisors dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $23.4 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund said goodbye to about $18.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alcon Inc. (NYSE:ALC) but similarly valued. These stocks are O’Reilly Automotive Inc (NASDAQ:ORLY), Paychex, Inc. (NASDAQ:PAYX), Barrick Gold Corporation (NYSE:GOLD), AFLAC Incorporated (NYSE:AFL), Chewy, Inc. (NYSE:CHWY), Marathon Petroleum Corp (NYSE:MPC), and The Allstate Corporation (NYSE:ALL). This group of stocks’ market values are similar to ALC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORLY 45 2704943 -4
PAYX 25 872105 -7
GOLD 49 1305890 -4
AFL 36 343937 1
CHWY 32 433780 -6
MPC 46 1966638 3
ALL 41 893928 3
Average 39.1 1217317 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $1217 million. That figure was $754 million in ALC’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Paychex, Inc. (NASDAQ:PAYX) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Alcon Inc. (NYSE:ALC) is even less popular than PAYX. Our overall hedge fund sentiment score for ALC is 30.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards ALC. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market again by 7.7 percentage points. Unfortunately ALC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); ALC investors were disappointed as the stock returned -1.3% since the end of the first quarter (through 7/16) 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 most of these stocks already outperformed the market since 2019.

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