Nomadic Value Partners recently released its Q2 2021 Investor Letter, a copy of which you can download here. In the second quarter, the fund posted returns of 9.6% compared to 8.6% total return for the S&P 500 Index. You should check out Nomadic Value’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q2 2021 Investor Letter, the fund highlighted a few stocks and Fastenal Co (NASDAQ:FAST) is one of them. Fastenal Co (NASDAQ:FAST) is engaged in wholesale distribution of industrial and construction supplies. In the last three months, Fastenal Co (NASDAQ:FAST) stock gained 2%. Here is what the fund said:
“In mid-June we completely sold out of Fastenal (FAST). Although we had been using FAST as a source of liquidity for a few months already, it still feels bad to say an official goodbye to such an amazing company. However, we must stay focused on the math and the math concludes a difficult task to get our return hurdle going forward. The last time FAST traded at a forward P/E ratio of 34x (the multiple at our exit), the year was 2012. The company had been growing at 20% per year, and the US was about to embark on a shale oil boom, sustaining a low-teens growth trajectory. Today, FAST’s sales growth could turn anemic as the surge for COVID safety products is waning and heavy construction and resources customers are slow to return. An investor must have an optimistic view towards 5+ years of strong real GDP growth as well as sustained inflation. If one lowers the growth assumption to a more likely outcome, then the implicit bet is that low to negative real interest rates will persist and the forward P/E multiple will stay elevated4. I do not want to make such a strong macro bet as the justification for owning a stock. Fastenal is a cyclical business with a growth model proven to take market share secularly, but the time to buy FAST (the stock) will be when we are in the depths of an industrial recession. Stay tuned.”
Credit: Wikipedia Commons
In August, we published an article revealing that investment management firm Madison Funds also sold Fastenal Co (NASDAQ:FAST) stock.
In Q1 2021, the number of bullish hedge fund positions on Fastenal Co (NASDAQ:FAST) stock decreased by about 20% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in FAST’s growth potential. Our calculations showed that Fastenal Co (NASDAQ:FAST) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage.
Disclosure: None. This article is originally published at Insider Monkey.
