Alibaba’s (NYSE:BABA) (OTCPK:BABAF) shares are down 45% over the past year but don’t be tempted to call it a bottom just yet. Latest data reveals that institutional investors have collectively sold off over 25 million of Alibaba’s shares in the last 13F reporting cycle on a net basis. Clearly, these sophisticated investors feel the stock still has ample downside potential from the current levels, despite its recent correction, which should encourage investors to remain on the sidelines for the time being at least and reconsider their long-side thesis for the name. Let’s take a closer look to gain a better understanding of it all.
Tracking Institutional Activity
Let me start by saying that institutional investors have certain resources at their disposal – such as research teams, cutting-edge research tools, and access to company managements – that provide them with an edge over retail investors. So, tracking the trading activity of these sophisticated investors reveals how their sentiment pertaining to any given stock is evolving with time, and if it aligns with our trade direction.
Coming to Alibaba, a group of 437 institutions collectively bought 51.4 million shares, while another group of 704 institutions sold off 76.7 million of the ecommerce company’s shares in the last 13F cycle. This means that institutional investors sold off 25.3 million of Alibaba’s shares last quarter on a net basis. To put things in perspective, this selloff amounts to nearly 1% of the company’s total shares outstanding at the time of this writing.
To make matters worse, note how the number of institutions that sold off Alibaba’s shares (704), greatly outnumbered those that increased their positions (437) in the company. This is a clear indication that the selloff wasn’t concentrated across a few entities and was actually driven by a broad swath of institutions that grew bearish on the name.
What’s particularly interesting here is that Alibaba’s shares were on a constant decline during the last 13F…
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