The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Align Technology, Inc. (NASDAQ:ALGN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Align Technology, Inc. (NASDAQ:ALGN) was in 41 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 43. ALGN shareholders have witnessed an increase in support from the world's most elite money managers lately. There were 39 hedge funds in our database with ALGN holdings at the end of March. Our calculations also showed that ALGN isn't 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.
If you'd ask most investors, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, Our researchers choose to focus on the upper echelon of this club, approximately 850 funds. These investment experts oversee bulk of all hedge funds' total capital, and by tracking their unrivaled equity investments, Insider Monkey has brought to light numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Ricky Sandler of Eminence Capital
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's check out the new hedge fund action regarding Align Technology, Inc. (NASDAQ:ALGN).
What have hedge funds been doing with Align Technology, Inc. (NASDAQ:ALGN)?
At the end of June, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALGN over the last 20 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Align Technology, Inc. (NASDAQ:ALGN), with a stake worth $606.7 million reported as of the end of September. Trailing Renaissance Technologies was Bares Capital Management, which amassed a stake valued at $384.7 million. Hillhouse Capital Management, Viking Global, and Fisher Asset 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 Bares Capital Management allocated the biggest weight to Align Technology, Inc. (NASDAQ:ALGN), around 9.49% of its 13F portfolio. Hitchwood Capital Management is also relatively very bullish on the stock, earmarking 2.12 percent of its 13F equity portfolio to ALGN.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, initiated the largest position in Align Technology, Inc. (NASDAQ:ALGN). Viking Global had $148 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $51.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Philippe Laffont's Coatue Management, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Arthur B Cohen and Joseph Healey's Healthcor Management LP.
Let's also examine hedge fund activity in other stocks similar to Align Technology, Inc. (NASDAQ:ALGN). We will take a look at Welltower Inc. (NYSE:WELL), Sun Life Financial Inc. (NYSE:SLF), Stanley Black & Decker, Inc. (NYSE:SWK), Skyworks Solutions Inc (NASDAQ:SWKS), Trane Technologies plc (NYSE:TT), TELUS Corporation (NYSE:TU), and FleetCor Technologies, Inc. (NYSE:FLT). All of these stocks' market caps resemble ALGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WELL,27,655260,2 SLF,14,85306,-2 SWK,33,807322,-3 SWKS,49,993689,20 TT,40,730073,4 TU,15,194956,0 FLT,53,2212169,2 Average,33,811254,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $811 million. That figure was $1961 million in ALGN's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 14 bullish hedge fund positions. Align Technology, Inc. (NASDAQ:ALGN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALGN is 70.2. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately ALGN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ALGN were disappointed as the stock returned 8.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.