In this article we will take a look at whether hedge funds think Fastly, Inc. (NYSE:FSLY) 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 FSLY a good stock to buy now? Investors who are in the know were getting less optimistic. The number of bullish hedge fund positions dropped by 5 recently. Fastly, Inc. (NYSE:FSLY) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 27. 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 for a quick look at the top 5 stocks). There were 27 hedge funds in our database with FSLY holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are more than 8000 funds in operation at the moment, Our experts look at the moguls of this group, about 850 funds. These money managers direct the majority of the hedge fund industry’s total asset base, and by keeping track of their inimitable picks, Insider Monkey has identified numerous investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed 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 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Alex Sacerdote of Whale Rock Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we’re going to take a look at the recent hedge fund action surrounding Fastly, Inc. (NYSE:FSLY).
Do Hedge Funds Think FSLY Is A Good Stock To Buy Now?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FSLY over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Abdiel Capital Advisors held the most valuable stake in Fastly, Inc. (NYSE:FSLY), which was worth $890.1 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $486.4 million worth of shares. Citadel Investment Group, Renaissance Technologies, and Athanor Capital 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 Abdiel Capital Advisors allocated the biggest weight to Fastly, Inc. (NYSE:FSLY), around 27.96% of its 13F portfolio. Stepstone Group is also relatively very bullish on the stock, designating 16.62 percent of its 13F equity portfolio to FSLY.
Judging by the fact that Fastly, Inc. (NYSE:FSLY) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers who were dropping their entire stakes in the third quarter. Intriguingly, Jeff Osher’s No Street Capital cut the biggest position of the 750 funds monitored by Insider Monkey, comprising an estimated $63.8 million in stock. Brad Farber’s fund, Atika Capital, also sold off its stock, about $5.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Fastly, Inc. (NYSE:FSLY). These stocks are Enel Americas S.A. (NYSE:ENIA), Credicorp Ltd. (NYSE:BAP), CBOE Global Markets Inc (NASDAQ:CBOE), Zynga Inc (NASDAQ:ZNGA), Sunrun Inc (NASDAQ:RUN), Pegasystems Inc. (NASDAQ:PEGA), and NetApp Inc. (NASDAQ:NTAP). This group of 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 |
|---|---|---|---|
| ENIA | 11 | 57881 | -1 |
| BAP | 19 | 139193 | -1 |
| CBOE | 33 | 872502 | 1 |
| ZNGA | 48 | 959687 | -4 |
| RUN | 29 | 3270810 | 8 |
| PEGA | 32 | 1866556 | 4 |
| NTAP | 31 | 429263 | 6 |
| Average | 29 | 1085127 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1085 million. That figure was $1686 million in FSLY’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 11 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 overall hedge fund sentiment score for FSLY is 39.3. 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 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 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 0.6% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
