We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Fastenal Company (NASDAQ:FAST).
Is Fastenal Company (NASDAQ:FAST) a marvelous investment today? Prominent investors are taking a pessimistic view. The number of bullish hedge fund bets retreated by 4 in recent months. Our calculations also showed that FAST isn't among the 30 most popular stocks among hedge funds.
At the moment there are a lot of methods investors can use to appraise publicly traded companies. A duo of the best methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace their index-focused peers by a solid margin (see the details here).
We're going to take a glance at the recent hedge fund action regarding Fastenal Company (NASDAQ:FAST).
How have hedgies been trading Fastenal Company (NASDAQ:FAST)?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FAST over the last 15 quarters. So, let's see 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, William Duhamel's Route One Investment Company has the most valuable position in Fastenal Company (NASDAQ:FAST), worth close to $522.4 million, accounting for 12.5% of its total 13F portfolio. Sitting at the No. 2 spot is Brian Bares of Bares Capital Management, with a $287 million position; 8.1% of its 13F portfolio is allocated to the company. Some other peers that are bullish contain William von Mueffling's Cantillon Capital Management, Lee Hicks and Jan Koerner's Park Presidio Capital and Ken Griffin's Citadel Investment Group.
Since Fastenal Company (NASDAQ:FAST) has witnessed a decline in interest from hedge fund managers, it's safe to say that there is a sect of fund managers that elected to cut their entire stakes heading into Q3. At the top of the heap, Robert Joseph Caruso's Select Equity Group sold off the biggest investment of the 700 funds watched by Insider Monkey, worth about $5.9 million in stock. Michael Gelband's fund, ExodusPoint Capital, also said goodbye to its stock, about $4.1 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Fastenal Company (NASDAQ:FAST). We will take a look at Hess Corporation (NYSE:HES), Entergy Corporation (NYSE:ETR), Ameren Corporation (NYSE:AEE), and Waters Corporation (NYSE:WAT). This group of stocks' market valuations resemble FAST's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HES,29,1774205,-7 ETR,33,1469733,2 AEE,21,739961,-2 WAT,30,689161,-2 Average,28.25,1168265,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $1168 million. That figure was $1145 million in FAST's case. Entergy Corporation (NYSE:ETR) is the most popular stock in this table. On the other hand Ameren Corporation (NYSE:AEE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Fastenal Company (NASDAQ:FAST) is even less popular than AEE. Hedge funds dodged a bullet by taking a bearish stance towards FAST. Our calculations showed that the top 15 most popular hedge fund stocks returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FAST wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FAST investors were disappointed as the stock returned -52.1% during the same time frame 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 so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.