Hedge Funds Have Never Been This Bullish On Fastly, Inc. (FSLY)

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fastly, Inc. (NYSE:FSLY).

Fastly, Inc. (NYSE:FSLY) has experienced an increase in hedge fund interest of late. FSLY was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 16 hedge funds in our database with FSLY holdings at the end of the previous quarter. Our calculations also showed that FSLY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To most investors, hedge funds are viewed as worthless, old financial tools of yesteryear. While there are over 8000 funds in operation at present, We choose to focus on the masters of this club, around 850 funds. Most estimates calculate that this group of people preside over most of the smart money’s total capital, and by following their matchless stock picks, Insider Monkey has brought to light a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the latest hedge fund action encompassing Fastly, Inc. (NYSE:FSLY).

How are hedge funds trading Fastly, Inc. (NYSE:FSLY)?

At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FSLY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Abdiel Capital Advisors was the largest shareholder of Fastly, Inc. (NYSE:FSLY), with a stake worth $79 million reported as of the end of September. Trailing Abdiel Capital Advisors was Whale Rock Capital Management, which amassed a stake valued at $39.3 million. Athanor Capital, Citadel Investment Group, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stepstone Group allocated the biggest weight to Fastly, Inc. (NYSE:FSLY), around 18.18% of its 13F portfolio. Abdiel Capital Advisors is also relatively very bullish on the stock, earmarking 4.94 percent of its 13F equity portfolio to FSLY.

As aggregate interest increased, key money managers were breaking ground themselves. Whale Rock Capital Management, managed by Alex Sacerdote, initiated the largest position in Fastly, Inc. (NYSE:FSLY). Whale Rock Capital Management had $39.3 million invested in the company at the end of the quarter. James Thomas Berylson’s Berylson Capital Partners also initiated a $4.6 million position during the quarter. The other funds with brand new FSLY positions are Ian Simm’s Impax Asset Management, Mark Coe’s Intrinsic Edge Capital, and Charles Davidson and Joseph Jacobs’s Wexford Capital.

Let’s check out hedge fund activity in other stocks similar to Fastly, Inc. (NYSE:FSLY). These stocks are Hope Bancorp, Inc. (NASDAQ:HOPE), Tricida, Inc. (NASDAQ:TCDA), Redwood Trust, Inc. (NYSE:RWT), and Group 1 Automotive, Inc. (NYSE:GPI). This group of stocks’ market valuations resemble FSLY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOPE 19 86079 5
TCDA 24 780285 7
RWT 13 95921 -5
GPI 22 173892 1
Average 19.5 284044 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $164 million in FSLY’s case. Tricida, Inc. (NASDAQ:TCDA) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 13 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on FSLY as the stock returned 2.5% during the same time period and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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