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Fastenal Company (FAST): Were Hedge Funds Right About This Stock?

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·5 min read
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  • FAST

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Fastenal Company (NASDAQ:FAST).

Is Fastenal Company (NASDAQ:FAST) an outstanding stock to buy now? Prominent investors were getting more optimistic. The number of bullish hedge fund positions increased by 1 in recent months. Fastenal Company (NASDAQ:FAST) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that FAST isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, 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. Keeping this in mind we're going to go over the latest hedge fund action surrounding Fastenal Company (NASDAQ:FAST).

Do Hedge Funds Think FAST Is A Good Stock To Buy Now?

At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the first quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in FAST a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is FAST A Good Stock To Buy?
Is FAST A Good Stock To Buy?

The largest stake in Fastenal Company (NASDAQ:FAST) was held by Cantillon Capital Management, which reported holding $302.6 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $111.1 million position. Other investors bullish on the company included Select Equity Group, D E Shaw, and Motley Fool Asset Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Fastenal Company (NASDAQ:FAST), around 4.05% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, designating 2.04 percent of its 13F equity portfolio to FAST.

Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in Fastenal Company (NASDAQ:FAST). Millennium Management had $4.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Bruce Kovner's Caxton Associates LP, and Renee Yao's Neo Ivy Capital.

Let's go over hedge fund activity in other stocks similar to Fastenal Company (NASDAQ:FAST). These stocks are Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Zscaler, Inc. (NASDAQ:ZS), McKesson Corporation (NYSE:MCK), Old Dominion Freight Line (NASDAQ:ODFL), ViacomCBS Inc. (NASDAQ:VIAC), Occidental Petroleum Corporation (NYSE:OXY), and Equifax Inc. (NYSE:EFX). All of these stocks' market caps resemble FAST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLTW,70,5594291,4 ZS,38,1102517,4 MCK,51,2314668,0 ODFL,47,673076,7 VIAC,71,1872050,-18 OXY,57,3620384,5 EFX,37,3075021,0 Average,53,2607430,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $2607 million. That figure was $650 million in FAST's case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Equifax Inc. (NYSE:EFX) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks Fastenal Company (NASDAQ:FAST) is even less popular than EFX. Our overall hedge fund sentiment score for FAST is 25.7. 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. Hedge funds clearly dropped the ball on FAST as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on FAST as the stock returned 13.1% since Q2 (through November 5th) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.