As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about FireEye Inc (NASDAQ:FEYE).
Is FireEye Inc (NASDAQ:FEYE) an exceptional investment today? Money managers are selling. The number of bullish hedge fund bets dropped by 1 lately. Our calculations also showed that feye isn’t among the 30 most popular stocks among hedge funds. FEYE was in 27 hedge funds’ portfolios at the end of March. There were 28 hedge funds in our database with FEYE positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a glance at the new hedge fund action regarding FireEye Inc (NASDAQ:FEYE).
How have hedgies been trading FireEye Inc (NASDAQ:FEYE)?
Heading into the second quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FEYE over the last 15 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in FireEye Inc (NASDAQ:FEYE) was held by Citadel Investment Group, which reported holding $110.4 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $52.3 million position. Other investors bullish on the company included Renaissance Technologies, Alyeska Investment Group, and Arrowstreet Capital.
Because FireEye Inc (NASDAQ:FEYE) has experienced falling interest from the smart money, logic holds that there was a specific group of hedgies who were dropping their entire stakes last quarter. Interestingly, Cynthia Paul’s Lynrock Lake said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, worth close to $3.3 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $2.5 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FireEye Inc (NASDAQ:FEYE) but similarly valued. These stocks are Copa Holdings, S.A. (NYSE:CPA), Merit Medical Systems, Inc. (NASDAQ:MMSI), TCF Financial Corporation (NYSE:TCF), and Semtech Corporation (NASDAQ:SMTC). All of these stocks’ market caps match FEYE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $223 million. That figure was $366 million in FEYE’s case. TCF Financial Corporation (NYSE:TCF) is the most popular stock in this table. On the other hand Copa Holdings, S.A. (NYSE:CPA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks FireEye Inc (NASDAQ:FEYE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FEYE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FEYE were disappointed as the stock returned -10.1% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.