While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Alphabet Inc (NASDAQ:GOOG) and compare it to other stocks like Berkshire Hathaway Inc. (NYSE:BRK-B), Facebook Inc (NASDAQ:FB), Alibaba Group Holding Limited (NYSE:BABA), and Visa Inc (NYSE:V).
Alphabet Inc (NASDAQ:GOOG) has experienced an increase in hedge fund interest in recent months. GOOG was in 136 hedge funds' portfolios at the end of the third quarter of 2019. There were 126 hedge funds in our database with GOOG holdings at the end of the previous quarter. Our calculations also showed that GOOG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the key hedge fund action regarding Alphabet Inc (NASDAQ:GOOG).
What does smart money think about Alphabet Inc (NASDAQ:GOOG)?
Heading into the fourth quarter of 2019, a total of 136 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 130 hedge funds held shares or bullish call options in GOOG a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Eagle Capital Management was the largest shareholder of Alphabet Inc (NASDAQ:GOOG), with a stake worth $2331.8 million reported as of the end of September. Trailing Eagle Capital Management was Generation Investment Management, which amassed a stake valued at $1393.2 million. Egerton Capital Limited, GQG Partners, and Orbis Investment Management 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 Key Square Capital Management allocated the biggest weight to Alphabet Inc (NASDAQ:GOOG), around 37.42% of its portfolio. Skye Global Management is also relatively very bullish on the stock, designating 27.49 percent of its 13F equity portfolio to GOOG.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Alphabet Inc (NASDAQ:GOOG) headfirst. Key Square Capital Management, managed by Scott Bessent, established the largest position in Alphabet Inc (NASDAQ:GOOG). Key Square Capital Management had $135.9 million invested in the company at the end of the quarter. Alexander Captain's Cat Rock Capital also made a $70.1 million investment in the stock during the quarter. The other funds with brand new GOOG positions are Guy Shahar's DSAM Partners, Benjamin A. Smith's Laurion Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks similar to Alphabet Inc (NASDAQ:GOOG). These stocks are Berkshire Hathaway Inc. (NYSE:BRK-B), Facebook Inc (NASDAQ:FB), Alibaba Group Holding Limited (NYSE:BABA), and Visa Inc (NYSE:V). This group of stocks' market caps resemble GOOG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRK-B,99,22272006,6 FB,179,20837470,-3 BABA,149,19197070,22 V,132,15686359,15 Average,139.75,19498226,10 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 139.75 hedge funds with bullish positions and the average amount invested in these stocks was $19498 million. That figure was $15585 million in GOOG's case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Berkshire Hathaway Inc. (NYSE:BRK-B) is the least popular one with only 99 bullish hedge fund positions. Alphabet Inc (NASDAQ:GOOG) is not the most popular stock in this group but that's because other stocks in this list are also immensely popular. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GOOG, though not to the same extent, as the stock returned 7.1% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.