Hedge Funds Aren’t Done Buying Fastly, Inc. (FSLY)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Fastly, Inc. (NYSE:FSLY) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Fastly, Inc. (NYSE:FSLY) has experienced an increase in hedge fund interest in recent months. Our calculations also showed that FSLY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are dozens of tools stock market investors have at their disposal to size up their stock investments. A couple of the less utilized tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outclass the S&P 500 by a superb margin (see the details here).

Colin Moran Abdiel Capital

Colin Moran of Abdiel Capital Advisors

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s go over the key hedge fund action regarding Fastly, Inc. (NYSE:FSLY).

What have hedge funds been doing with Fastly, Inc. (NYSE:FSLY)?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in FSLY over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FSLY A Good Stock To Buy?

The largest stake in Fastly, Inc. (NYSE:FSLY) was held by Abdiel Capital Advisors, which reported holding $93.5 million worth of stock at the end of September. It was followed by Tiger Global Management with a $9.6 million position. Other investors bullish on the company included Athanor Capital, Driehaus Capital, and Duquesne Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Fastly, Inc. (NYSE:FSLY), around 5.74% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to FSLY.

Now, some big names have jumped into Fastly, Inc. (NYSE:FSLY) headfirst. Athanor Capital, managed by Parvinder Thiara, created the most valuable position in Fastly, Inc. (NYSE:FSLY). Athanor Capital had $4.5 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Sculptor Capital, David E. Shaw’s D E Shaw, and Chet Kapoor’s Tenzing Global Investors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Fastly, Inc. (NYSE:FSLY) but similarly valued. These stocks are The Hain Celestial Group, Inc. (NASDAQ:HAIN), TeleTech Holdings, Inc. (NASDAQ:TTEC), Chart Industries, Inc. (NASDAQ:GTLS), and Sanmina Corporation (NASDAQ:SANM). This group of stocks’ market valuations match FSLY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAIN 19 545805 2
TTEC 14 41238 -3
GTLS 19 261236 -5
SANM 20 211992 2
Average 18 265068 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $127 million in FSLY’s case. Sanmina Corporation (NASDAQ:SANM) is the most popular stock in this table. On the other hand TeleTech Holdings, Inc. (NASDAQ:TTEC) is the least popular one with only 14 bullish hedge fund positions. Fastly, Inc. (NYSE:FSLY) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FSLY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FSLY investors were disappointed as the stock returned -15% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.