As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. 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 Align Technology, Inc. (NASDAQ:ALGN).
Align Technology, Inc. (NASDAQ:ALGN) was in 30 hedge funds’ portfolios at the end of the first quarter of 2019. ALGN has experienced a decrease in activity from the world’s largest hedge funds of late. There were 37 hedge funds in our database with ALGN holdings at the end of the previous quarter. Our calculations also showed that algn isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action surrounding Align Technology, Inc. (NASDAQ:ALGN).
What have hedge funds been doing with Align Technology, Inc. (NASDAQ:ALGN)?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in ALGN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Align Technology, Inc. (NASDAQ:ALGN), with a stake worth $642.6 million reported as of the end of March. Trailing Renaissance Technologies was Viking Global, which amassed a stake valued at $510.7 million. Balyasny Asset Management, Citadel Investment Group, and Partner Fund Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Align Technology, Inc. (NASDAQ:ALGN) has experienced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of fund managers that decided to sell off their positions entirely last quarter. At the top of the heap, Eashwar Krishnan’s Tybourne Capital Management dropped the biggest stake of all the hedgies followed by Insider Monkey, valued at about $215.8 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also cut its stock, about $11 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 7 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Align Technology, Inc. (NASDAQ:ALGN). We will take a look at Anadarko Petroleum Corporation (NYSE:APC), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Synchrony Financial (NYSE:SYF), and Fox Corporation (NASDAQ:FOXA). All of these stocks’ market caps match ALGN’s market cap.
|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 49.75 hedge funds with bullish positions and the average amount invested in these stocks was $2671 million. That figure was $1757 million in ALGN’s case. Fox Corporation (NASDAQ:FOXA) is the most popular stock in this table. On the other hand Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Align Technology, Inc. (NASDAQ:ALGN) is even less popular than WLTW. Hedge funds clearly dropped the ball on ALGN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on ALGN as the stock returned 4.3% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.