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Who Hates Facebook Inc (FB)?

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Mark ZuckerbergFacebook Inc (NASDAQ:FB) investors should be aware of a decrease in enthusiasm from smart money in recent months.

According to most stock holders, hedge funds are assumed to be unimportant, old financial tools of years past. While there are over 8000 funds with their doors open at the moment, we choose to focus on the elite of this club, about 450 funds. Most estimates calculate that this group controls the lion’s share of all hedge funds’ total asset base, and by monitoring their best investments, we have figured out a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading sentiment is another way to break down the marketplace. As the old adage goes: there are a number of reasons for an insider to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this method if you know where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the key action encompassing Facebook Inc (NASDAQ:FB).

How are hedge funds trading Facebook Inc (NASDAQ:FB)?

At Q1’s end, 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’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly.

Of the funds we track, D. E. Shaw’s D E Shaw had the most valuable position in Facebook Inc (NASDAQ:FB), worth close to $194.5 million, accounting for 0.5% of its total 13F portfolio. Coming in second is Clifford G. Fox of Columbus Circle Investors, with a $154.6 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Jim Simons’s Renaissance Technologies, Leon Cooperman’s Omega Advisors and Patrick McCormack’s Tiger Consumer Management.

Since Facebook Inc (NASDAQ:FB) has experienced a declination in interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that elected to cut their full holdings in Q1. It’s worth mentioning that Stephen Mandel’s Lone Pine Capital sold off the largest investment of the “upper crust” of funds we key on, comprising an estimated $290.9 million in stock., and David Stemerman of Conatus Capital Management was right behind this move, as the fund dumped about $137.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 27 funds in Q1.

Insider trading activity in Facebook Inc (NASDAQ:FB)

Insider buying is most useful when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time period, Facebook Inc (NASDAQ:FB) has experienced zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).

Let’s go over 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). All of these stocks are in the internet information providers industry and their market caps match FB’s market cap.

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