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Hedge Funds Keep Buying Fastly, Inc. (FSLY)

In this article you are going to find out whether hedge funds think Fastly, Inc. (NYSE:FSLY) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Fastly, Inc. (NYSE:FSLY) a great investment today? The best stock pickers are getting more optimistic. The number of bullish hedge fund positions went up by 3 recently. Our calculations also showed that FSLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus 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 these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action regarding Fastly, Inc. (NYSE:FSLY).

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

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in FSLY a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the biggest position in Fastly, Inc. (NYSE:FSLY), worth close to $169 million, comprising 7.9% of its total 13F portfolio. The second largest stake is held by Whale Rock Capital Management, managed by Alex Sacerdote, which holds a $48.4 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions contain Jeff Osher’s No Street Capital, Anand Parekh’s Alyeska Investment Group and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Fastly, Inc. (NYSE:FSLY), around 7.9% of its 13F portfolio. Stepstone Group is also relatively very bullish on the stock, designating 7.38 percent of its 13F equity portfolio to FSLY.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. No Street Capital, managed by Jeff Osher, established the most outsized position in Fastly, Inc. (NYSE:FSLY). No Street Capital had $13 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $5.7 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Dmitry Balyasny’s Balyasny Asset Management, and Noam Gottesman’s GLG Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fastly, Inc. (NYSE:FSLY) but similarly valued. These stocks are Companhia Siderurgica Nacional (NYSE:SID), Univar Solutions Inc (NYSE:UNVR), EQT Corporation (NYSE:EQT), and CNO Financial Group Inc (NYSE:CNO). All of these stocks’ market caps are similar to FSLY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SID 5 3203 -1
UNVR 32 686782 -11
EQT 30 234166 1
CNO 15 218787 -8
Average 20.5 285735 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $277 million in FSLY’s case. Univar Solutions Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 5 bullish hedge fund positions. Fastly, Inc. (NYSE:FSLY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on FSLY as the stock returned 152.2% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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