Alibaba set a record with its initial public offering two years ago, and now, its shares are headed toward their second best quarter since then, but hedge funds are missing out. Alibaba’s stock has seen a massive jump of 38% since the end of June, bringing it to a 21-month high, but hedge funds clipped their holdings by 2.2 million shares in the previous three months, notes a Bloomberg.

Alibaba Shares On The Rise, But Hedge Funds Are Missing It
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Hedge funds miss rally

There was a time when Alibaba was the darling of hedge fund managers, with George Soros’s Soros Fund Management LLC and Dan Loeb’s Third Point LLC holding substantial stakes following the company’s $25 billion September 2014 IPO. Data from Bloomberg shows that hedge funds held positions valued at about $14 billion as of Sept. 30, 2014. However, hedge funds have lowered their stake in the e-commerce giant every quarter, and as of June 30, they held $4.4 billion worth of shares.

Thornburg Investment Management portfolio manager Charlie Wilson told Bloomberg that they sold Alibaba last year during the sell-off. Wilson’s $1.2 billion Thornburg Developing World Fund has outperformed 91% of its peers over the past five years.

“They really surprised us in their ability to monetize. We had held it previously, and then I think we had made the wrong decision. We recently repurchased after we reviewed our estimates,” stated Wilson.

Analysts bullish on Alibaba

Meanwhile Alibaba shares continue to soar. A pair of bullish analyst reports on Tuesday sent Alibaba shares up by about 2%. Large-cap growth funds are largely under-owned the Chinese online retailer, said one firm, while the other raised its price target 18% on the belief that the stock’s year-to-date tear will continue.

MKM Partners analyst Rob Sanderson said in a report dated Sept. 26 that he is still “enthusiastically bullish” on Alibaba following a series of investor meetings with the company’s management last week. Since the shares are near their highest levels after the initial public offering, analyst states that investors are looking for an answer to a key question about who will be incremental buyers of the retailer’s stock.

Determining who might buy the shares is easy after a review of the last set of filings for institutional investors, believes Sanderson. He said based on the filings, large fund managers were “significantly underweight” Alibaba.

On Tuesday, Alibaba shares closed up 2.24% at $108.26. Year to date, the stock is up almost 33%, while in the last year, it is up almost 83%. The stock has a 52-week high of $109.76 and a 52-week low of $57.20.