Hedge Funds Proved Right On Alibaba Group Holding Ltd (BABA)


Alibaba Group Holding Ltd (NYSE:BABA) was overwhelmingly the most popular new stock among hedge funds. There were 110 hedge funds that bought the stock during and after its IPO. This level of hedge fund interest was enough to make Alibaba Group Holding Ltd (NYSE:BABA) one of the 10 most popular stocks among hedge funds. The stock returned 16% since the end of the third quarter, vs. 4.2% return for the S&P 500 Index ETF (SPY). Hedge funds were proved right on betting nearly $8 billion on Alibaba.

Alibaba, Hedge Funds

This isn’t a fluke, according to hedge fund tracking website Insider Monkey. Their research has shown that the most popular stocks among hedge funds historically outperformed the market. One of the most fertile areas for outperformance was the small-cap space. The 15 most popular stocks among hedge funds beat the market by double digits in their back tests. Insider Monkey has been sharing the list of these small-cap stocks since the end of August 2012 in real time. Their picks returned 14% in 2012, vs. 2% for SPY. The outperformance was even better in 2013: 53% vs. 32%. Most hedge funds had low single digit returns in 2014. Despite this poor performance Insider Monkey’s top 15 small-cap picks returned 28% vs. 13.5% for SPY (see the details here).

What does the smart money think about Alibaba Group Holding Ltd (NYSE:BABA)?

Viking Global, managed by Andreas Halvorsen, holds the largest position in Alibaba Group Holding Ltd (NYSE:BABA). Viking Global has a $1.01 billion position in the stock, comprising 4.1% of its 13F portfolio. The second most bullish hedge fund manager is Discovery Capital Management, managed by Rob Citrone, which held a $923.4 million position; 10.4% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish comprise Dan Loeb’s Third Point, George Soros’s Soros Fund Management and D. E. Shaw’s D E Shaw.

Hedge funds have about another 5 weeks to disclose their Q4 positions in Alibaba Group Holding Ltd (NYSE:BABA).

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