At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Align Technology, Inc. (NASDAQ:ALGN) makes for a good investment right now.
Is ALGN a good stock to buy now? Money managers were becoming more confident. The number of bullish hedge fund positions inched up by 6 recently. Align Technology, Inc. (NASDAQ:ALGN) was in 47 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ALGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 seen as unimportant, old financial vehicles of years past. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the elite of this group, around 850 funds. Most estimates calculate that this group of people direct the lion’s share of the hedge fund industry’s total asset base, and by tailing their matchless stock picks, Insider Monkey has come up with many investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to view the key hedge fund action encompassing Align Technology, Inc. (NASDAQ:ALGN).
Do Hedge Funds Think ALGN Is A Good Stock To Buy Now?
At the end of September, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ALGN over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Align Technology, Inc. (NASDAQ:ALGN), which was worth $472.9 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $384.5 million worth of shares. Melvin Capital Management, Viking Global, and Hillhouse Capital Management 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 Bares Capital Management allocated the biggest weight to Align Technology, Inc. (NASDAQ:ALGN), around 8.12% of its 13F portfolio. Hitchwood Capital Management is also relatively very bullish on the stock, dishing out 1.73 percent of its 13F equity portfolio to ALGN.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, created the largest position in Align Technology, Inc. (NASDAQ:ALGN). Melvin Capital Management had $298.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $18 million position during the quarter. The other funds with brand new ALGN positions are Principal Global Investors’s Columbus Circle Investors, Ray Dalio’s Bridgewater Associates, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Align Technology, Inc. (NASDAQ:ALGN). We will take a look at TransDigm Group Incorporated (NYSE:TDG), Fortive Corporation (NYSE:FTV), Rockwell Automation Inc. (NYSE:ROK), Repros Therapeutics Inc (NASDAQ:RPRX), Lennar Corporation (NYSE:LEN), Xilinx, Inc. (NASDAQ:XLNX), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market values are closest to ALGN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.1 hedge funds with bullish positions and the average amount invested in these stocks was $2083 million. That figure was $2165 million in ALGN’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Repros Therapeutics Inc (NASDAQ:RPRX) is the least popular one with only 20 bullish hedge fund positions. Align Technology, Inc. (NASDAQ:ALGN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALGN is 70.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ALGN as the stock returned 57.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.