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Is Fastly, Inc. (FSLY) A Good Stock To Buy?

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·6 min read
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  • FSLY
  • ^GSPC

In this article we will analyze whether Fastly, Inc. (NYSE:FSLY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is FSLY a good stock to buy? Fastly, Inc. (NYSE:FSLY) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 32. FSLY investors should be aware of a decrease in enthusiasm from smart money recently. There were 32 hedge funds in our database with FSLY holdings at the end of December. Our calculations also showed that FSLY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are a lot of metrics market participants use to assess their stock investments. Two of the most under-the-radar metrics are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the S&P 500 by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 view the new hedge fund action regarding Fastly, Inc. (NYSE:FSLY).

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

At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the fourth quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in FSLY a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Abdiel Capital Advisors was the largest shareholder of Fastly, Inc. (NYSE:FSLY), with a stake worth $763.6 million reported as of the end of March. Trailing Abdiel Capital Advisors was Whale Rock Capital Management, which amassed a stake valued at $277.3 million. ARK Investment Management, Citadel Investment Group, and Citadel Investment Group 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 24.54% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, earmarking 6.21 percent of its 13F equity portfolio to FSLY.

Judging by the fact that Fastly, Inc. (NYSE:FSLY) has faced declining sentiment from hedge fund managers, it's easy to see that there were a few funds who were dropping their full holdings by the end of the first quarter. Interestingly, Stanley Druckenmiller's Duquesne Capital dumped the largest position of all the hedgies tracked by Insider Monkey, totaling close to $13.7 million in stock, and Ryan Caldwell's Chiron Investment Management was right behind this move, as the fund dropped about $12.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the first quarter.

Let's go over hedge fund activity in other stocks similar to Fastly, Inc. (NYSE:FSLY). These stocks are Performance Food Group Company (NYSE:PFGC), Capri Holdings Limited (NYSE:CPRI), AutoNation, Inc. (NYSE:AN), Western Midstream Partners, LP (NYSE:WES), Kilroy Realty Corp (NYSE:KRC), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), and People's United Financial, Inc. (NASDAQ:PBCT). This group of stocks' market caps are closest to FSLY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFGC,18,330563,-4 CPRI,47,909126,5 AN,24,585168,1 WES,8,127464,-2 KRC,27,328922,2 RARE,25,588066,-1 PBCT,20,208579,-9 Average,24.1,439698,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $1324 million in FSLY's case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 8 bullish hedge fund positions. Fastly, Inc. (NYSE:FSLY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FSLY is 46.5. 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 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately FSLY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FSLY were disappointed as the stock returned -16.2% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.