In this article we will take a look at whether hedge funds think FireEye Inc (NASDAQ:FEYE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is FEYE stock a buy? Investors who are in the know were getting more optimistic. The number of bullish hedge fund positions moved up by 3 lately. FireEye Inc (NASDAQ:FEYE) was in 31 hedge funds’ portfolios at the end of December. The all time high for this statistic is 37. Our calculations also showed that FEYE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Ken Fisher of Fisher Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a gander at the fresh hedge fund action encompassing FireEye Inc (NASDAQ:FEYE).
Do Hedge Funds Think FEYE Is A Good Stock To Buy Now?
At the end of December, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in FEYE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Alta Park Capital held the most valuable stake in FireEye Inc (NASDAQ:FEYE), which was worth $41.1 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $39.3 million worth of shares. Jericho Capital Asset Management, Black-and-White Capital, and Fisher Asset Management 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 Corriente Advisors allocated the biggest weight to FireEye Inc (NASDAQ:FEYE), around 3.79% of its 13F portfolio. Alta Park Capital is also relatively very bullish on the stock, designating 3.46 percent of its 13F equity portfolio to FEYE.
Consequently, some big names were breaking ground themselves. Alta Park Capital, managed by Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali, assembled the largest position in FireEye Inc (NASDAQ:FEYE). Alta Park Capital had $41.1 million invested in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also made a $35.5 million investment in the stock during the quarter. The following funds were also among the new FEYE investors: Seth Wunder’s Black-and-White Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and John Hurley’s Cavalry Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as FireEye Inc (NASDAQ:FEYE) but similarly valued. We will take a look at Tenable Holdings, Inc. (NASDAQ:TENB), Envista Holdings Corporation (NYSE:NVST), Enel Chile S.A. (NYSE:ENIC), Coty Inc (NYSE:COTY), TriNet Group Inc (NYSE:TNET), Healthequity Inc (NASDAQ:HQY), and CoreSite Realty Corp (NYSE:COR). This group of stocks’ market caps are similar to FEYE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TENB | 39 | 901500 | 9 |
| NVST | 33 | 801088 | 13 |
| ENIC | 7 | 22302 | 3 |
| COTY | 22 | 316463 | -4 |
| TNET | 21 | 438322 | -5 |
| HQY | 20 | 241668 | -4 |
| COR | 14 | 213827 | -5 |
| Average | 22.3 | 419310 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $314 million in FEYE’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. FireEye Inc (NASDAQ:FEYE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FEYE is 70.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately FEYE wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on FEYE were disappointed as the stock returned -13.2% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
