Should I Avoid Alcon Inc. (ALC)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Alcon Inc. (NYSE:ALC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Alcon Inc. (NYSE:ALC) investors should pay attention to a decrease in hedge fund interest lately. Alcon Inc. (NYSE:ALC) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 26. There were 23 hedge funds in our database with ALC holdings at the end of March. Our calculations also showed that ALC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most investors, hedge funds are viewed as underperforming, old investment tools of years past. While there are over 8000 funds trading at present, We look at the bigwigs of this group, about 850 funds. These investment experts watch over bulk of all hedge funds’ total capital, and by tailing their finest stock picks, Insider Monkey has determined several investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

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. With all of this in mind we’re going to analyze the new hedge fund action regarding Alcon Inc. (NYSE:ALC).

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

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. On the other hand, there were a total of 21 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.

More specifically, Ako Capital was the largest shareholder of Alcon Inc. (NYSE:ALC), with a stake worth $419.5 million reported as of the end of June. Trailing Ako Capital was Sirios Capital Management, which amassed a stake valued at $52.3 million. Bridger Management, Marshall Wace LLP, and Polar Capital 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 Ako Capital allocated the biggest weight to Alcon Inc. (NYSE:ALC), around 4.73% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, designating 4.6 percent of its 13F equity portfolio to ALC.

Since Alcon Inc. (NYSE:ALC) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies that elected to cut their full holdings heading into Q3. It’s worth mentioning that Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $3.2 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $2.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alcon Inc. (NYSE:ALC) but similarly valued. These stocks are Republic Services, Inc. (NYSE:RSG), Otis Worldwide Corporation (NYSE:OTIS), SBA Communications Corporation (NASDAQ:SBAC), Corning Incorporated (NYSE:GLW), Welltower Inc. (NYSE:WELL), Nutrien Ltd. (NYSE:NTR), and KKR & Co Inc. (NYSE:KKR). All of these stocks’ market caps are closest to ALC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1821 million. That figure was $728 million in ALC’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Welltower Inc. (NYSE:WELL) is the least popular one with only 19 bullish hedge fund positions. Alcon Inc. (NYSE:ALC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALC is 33.7. 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 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% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on ALC as the stock returned 16.6% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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