Facebook Inc (NASDAQ:FB) has seen a decrease in hedge fund sentiment of late.
According to most shareholders, hedge funds are assumed to be underperforming, old financial tools of the past. While there are greater than 8000 funds trading at the moment, we choose to focus on the leaders of this group, around 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total capital, and by monitoring their highest performing picks, we have revealed a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as important, optimistic insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are lots of reasons for an insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this strategy if “monkeys” understand what to do (learn more here).
With these “truths” under our belt, it’s important to take a gander at the recent action encompassing Facebook Inc (NASDAQ:FB).
Hedge fund activity in Facebook Inc (NASDAQ:FB)
Heading into Q2, a total of 49 of the hedge funds we track were bullish in this stock, a change of -36% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably.
Of the funds we track, D E Shaw, managed by D. E. Shaw, holds the biggest position in Facebook Inc (NASDAQ:FB). D E Shaw has a $194.5 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Donald Chiboucis of Columbus Circle Investors, with a $154.6 million position; 1.2% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, Leon Cooperman’s Omega Advisors and Patrick McCormack’s Tiger Consumer Management.
Judging by the fact that Facebook Inc (NASDAQ:FB) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of fund managers that slashed their positions entirely at the end of the first quarter. Interestingly, Stephen Mandel’s Lone Pine Capital sold off the biggest investment of the 450+ funds we monitor, totaling about $290.9 million in stock.. David Stemerman’s fund, Conatus Capital Management, also sold off its stock, about $137.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 27 funds at the end of the first quarter.
What do corporate executives and insiders think about Facebook Inc (NASDAQ:FB)?
Insider purchases made by high-level executives is at its handiest when the company in focus has experienced transactions within the past 180 days. Over the last half-year time frame, Facebook Inc (NASDAQ:FB) has experienced zero unique insiders buying, and 9 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Facebook Inc (NASDAQ:FB). These stocks are Yandex NV (NASDAQ:YNDX), Google Inc (NASDAQ:GOOG), LinkedIn Corp (NYSE:LNKD), Yahoo! Inc. (NASDAQ:YHOO), and Baidu.com, Inc. (ADR) (NASDAQ:BIDU). This group of stocks belong to the internet information providers industry and their market caps resemble FB’s market cap.