Is GOOG A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September 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 Alphabet Inc (NASDAQ:GOOG).

Is GOOG a good stock to buy now?Alphabet Inc (NASDAQ:GOOG) investors should be aware of an increase in enthusiasm from smart money of late. Alphabet Inc (NASDAQ:GOOG) was in 150 hedge funds’ portfolios at the end of September. The all time high for this statistics is 148. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 144 hedge funds in our database with GOOG positions at the end of the second quarter. Our calculations also showed that GOOG ranks #7 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.

To most stock holders, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are over 8000 funds trading at present, Our researchers choose to focus on the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people preside over most of all hedge funds’ total capital, and by keeping an eye on their first-class stock picks, Insider Monkey has spotted several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually 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 .

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 check out the recent hedge fund action encompassing Alphabet Inc (NASDAQ:GOOG) to determine whether GOOG is a good stock to buy now?.

What have hedge funds been doing with Alphabet Inc (NASDAQ:GOOG)?

At the end of September, a total of 150 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOOG over the last 21 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Alphabet Inc (NASDAQ:GOOG), which was worth $2964 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $2233.9 million worth of shares. GQG Partners, Generation Investment Management, and Gardner Russo & Gardner 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 RIT Capital Partners allocated the biggest weight to Alphabet Inc (NASDAQ:GOOG), around 20.42% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, earmarking 17.8 percent of its 13F equity portfolio to GOOG.

Consequently, some big names were leading the bulls’ herd. GQG Partners, managed by Rajiv Jain, created the most valuable position in Alphabet Inc (NASDAQ:GOOG). GQG Partners had $826 million invested in the company at the end of the quarter. Chris Rokos’s Rokos Capital Management also made a $102.2 million investment in the stock during the quarter. The following funds also thought that GOOG is a good stock to buy now: Aaron Cowen’s Suvretta Capital Management, Farhad Nanji and Michael DeMichele’s MFN Partners, and Sander Gerber’s Hudson Bay Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alphabet Inc (NASDAQ:GOOG) but similarly valued. We will take a look at Alphabet Inc (NASDAQ:GOOGL), Alibaba Group Holding Limited (NYSE:BABA), Facebook Inc (NASDAQ:FB), Visa Inc (NYSE:V), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), and Tesla Inc. (NASDAQ:TSLA). This group of stocks’ market caps match GOOG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOOGL 162 14713801 5
BABA 166 28833956 12
FB 230 29337247 20
V 160 18651052 6
TSM 67 7971678 9
BRK-B 109 19555477 2
TSLA 67 8176828 4
Average 137.3 18177148 8.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 137.3 hedge funds with bullish positions and the average amount invested in these stocks was $18177 million. That figure was $15274 million in GOOG’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 67 bullish hedge fund positions. Alphabet Inc (NASDAQ:GOOG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GOOG is 79.5. 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. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on GOOG as the stock returned 22% since the end of Q3 (through 11/27) and outperformed the market. We believe GOOG is still a good stock to buy now as the company’s financial performance recently beat analysts’ estimates and the stock is gaining momentum.

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