Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Alphabet Inc (NASDAQ:GOOGL) based on that data and determine whether they were really smart about the stock.
Alphabet Inc (NASDAQ:GOOGL) investors should be aware of a decrease in support from the world's most elite money managers of late. Nevertheless, GOOGL climbed one spot in our rankings and currently ranks #4 among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we're going to take a gander at the new hedge fund action encompassing Alphabet Inc (NASDAQ:GOOGL).
What does smart money think about Alphabet Inc (NASDAQ:GOOGL)?
At Q2's end, a total of 157 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GOOGL over the last 20 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Alphabet Inc (NASDAQ:GOOGL), with a stake worth $2172.7 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $1546.1 million. AQR Capital Management, GQG Partners, and AltaRock Partners 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 AltaRock Partners allocated the biggest weight to Alphabet Inc (NASDAQ:GOOGL), around 26.19% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, earmarking 22.19 percent of its 13F equity portfolio to GOOGL.
Due to the fact that Alphabet Inc (NASDAQ:GOOGL) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few money managers that slashed their positions entirely last quarter. Intriguingly, Andreas Halvorsen's Viking Global dumped the biggest position of the "upper crust" of funds followed by Insider Monkey, worth about $363.9 million in stock, and Eashwar Krishnan's Tybourne Capital Management was right behind this move, as the fund cut about $86.2 million worth. These moves are interesting, as total hedge fund interest fell by 10 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Alphabet Inc (NASDAQ:GOOGL). These stocks are Alphabet Inc (NASDAQ:GOOG), Alibaba Group Holding Limited (NYSE:BABA), Facebook Inc (NASDAQ:FB), Berkshire Hathaway Inc. (NYSE:BRK-B), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), and Walmart Inc. (NYSE:WMT). This group of stocks' market caps resemble GOOGL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOOG,144,14761874,-3 BABA,154,24386257,-13 FB,210,25222524,-3 BRK-B,107,15633556,-8 V,154,17010420,-3 JNJ,94,4731250,12 WMT,60,5829223,5 Average,131.9,15367872,-1.9 [/table]
As you can see these stocks had an average of 131.9 hedge funds with bullish positions and the average amount invested in these stocks was $15.4 billion. That figure was $13.5 million in GOOGL's case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 60 bullish hedge fund positions. Alphabet Inc (NASDAQ:GOOGL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GOOGL is 87.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but still beat the market by 20.6 percentage points. Hedge funds were also right about betting on GOOGL, though not to the same extent, as the stock returned 11.8% since the end of June and outperformed the market as well.
