“Open sesame” was the password to a thieves’ den full of gold that a poor woodcutter named Ali Baba learned in the renowned “Arabian nights” Middle Eastern folk tale. These days hedge funds have learned that Chinese e-commerce giant Alibaba Group Holding might be considered the modern incarnation, as it seems to hold a key to stock market treasures.
During February Alibaba was a top winner for hedge funds holding the stock, according to Novus Research. Novus found that Alibaba added 4.09 basis points to the returns in the universe of hedge funds it follows. In adding alpha during the month, Alibaba was second only to Altaba, which is the Yahoo successor company that owns a minority stake in Alibaba. It added 4.51 basis points to hedge fund returns. (The rest of Yahoo was sold to Verizon Communications in 2017.)
Alibaba has gained 33 percent this year, and Altaba is up 27 percent.
For years, Alibaba has also been a favorite short target, and these days it is the largest worldwide short, making up over a fifth of total HK/China short exposure, according to S3Partners, a financial technology and analytics firm. Short interest in Alibaba was $20.8 billion as of March 5.
S3 Partners notes Alibaba is also the least profitable HK/China short.
Hedge funds have both loved and hated the stock. At the end of last year, several big funds dumped all of their Alibaba stock — missing out on this year’s surge unless they bought more in recent months.
Those selling all their Alibaba stock during the last quarter include Jana Partners, Carlson Capital Management, Third Point, Sachem Head, Moore Capital, and Tourbillon Capital, according to securities filings.
At the same, several funds took new positions in Alibaba during the quarter, including D.E. Shaw — which had the biggest increase with a new position of 3 million shares.
Eminence Capital, Oaktree Capital, and Balyasny Asset Management also took a new position in Alibaba during the quarter.
But the biggest winner in the Alibaba surge this year is Viking Global, with more than 10 million shares. Viking has the biggest Alibaba position among hedge funds, and it increased its position last quarter by 7.5 percent.
Next is Lone Pine, with 6.2 million shares. Coatue Management, with 5.4 million shares, had the second-biggest increase after D.E. Shaw.
Tiger Global Management has 4.1 million shares, after cutting its stake by more than a third during the final quarter of 2018.
The fifth-biggest hedge fund owner is AQR Capital Management, which has approximately 4 million shares.
Soroban Capital, with 2.8 million shares, also increased its stake during the quarter.
