Is It Time To Get Out of Fastenal Company (FAST)?

Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Fastenal Company (NASDAQ:FAST).

Is Fastenal Company (NASDAQ:FAST) a buy right now? The smart money is becoming less hopeful. The number of long hedge fund positions fell by 1 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MGM Resorts International (NYSE:MGM), Marathon Oil Corporation (NYSE:MRO), and National-Oilwell Varco, Inc. (NYSE:NOV) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How are hedge funds trading Fastenal Company (NASDAQ:FAST)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 4% drop from the previous quarter. That dip does come after a nearly 100% surge in hedgie ownership of the stock during the previous two quarters, so ownership is still high compared to a year earlier. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, William Duhamel’s Route One Investment Company has the number one position in Fastenal Company (NASDAQ:FAST), worth close to $184.9 million, corresponding to 8.4% of its total 13F portfolio. The second largest stake is held by Bares Capital Management, managed by Brian Bares, which holds a $117.4 million position; the fund has 7% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Robert Joseph Caruso’s Select Equity Group, D E Shaw, and Jim Simons’ Renaissance Technologies.

Due to the fact that Fastenal Company (NASDAQ:FAST) has experienced bearish sentiment from hedge fund managers, we can see that there exists a select few hedgies that decided to sell off their positions entirely last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of the 700 funds tracked by Insider Monkey, totaling close to $10.8 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $8.1 million worth of shares. These moves are important to note, as aggregate hedge fund interest fell by 1 fund last quarter.

Let’s now review hedge fund activity in other stocks similar to Fastenal Company (NASDAQ:FAST). We will take a look at MGM Resorts International (NYSE:MGM), Marathon Oil Corporation (NYSE:MRO), National-Oilwell Varco, Inc. (NYSE:NOV), and Macerich Co (NYSE:MAC). All of these stocks’ market caps are similar to FAST’s market cap.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $779 million. That figure was $625 million in FAST’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Macerich Co (NYSE:MAC) is the least popular one with only 19 bullish hedge fund positions. Fastenal Company (NASDAQ:FAST) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MGM might be a better candidate to consider a long position in.

Disclosure: None