Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of FireEye Inc (NASDAQ:FEYE) based on that data and determine whether they were really smart about the stock.
FireEye Inc (NASDAQ:FEYE) was in 28 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. FEYE investors should be aware of a decrease in hedge fund interest in recent months. There were 32 hedge funds in our database with FEYE positions at the end of the first quarter. Our calculations also showed that FEYE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we're going to check out the recent hedge fund action regarding FireEye Inc (NASDAQ:FEYE).
How have hedgies been trading FireEye Inc (NASDAQ:FEYE)?
At second quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FEYE over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cynthia Paul's Lynrock Lake has the number one position in FireEye Inc (NASDAQ:FEYE), worth close to $64.9 million, amounting to 5.1% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $50.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass D. E. Shaw's D E Shaw, Cynthia Paul's Lynrock Lake and Ken Fisher's Fisher Asset Management. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to FireEye Inc (NASDAQ:FEYE), around 5.11% of its 13F portfolio. Lynrock Lake is also relatively very bullish on the stock, earmarking 1.56 percent of its 13F equity portfolio to FEYE.
Due to the fact that FireEye Inc (NASDAQ:FEYE) has witnessed a decline in interest from the smart money, we can see that there is a sect of funds who were dropping their positions entirely heading into Q3. At the top of the heap, Ken Griffin's Citadel Investment Group dumped the largest stake of the 750 funds followed by Insider Monkey, totaling close to $35.2 million in stock. John Osterweis's fund, Osterweis Capital Management, also said goodbye to its stock, about $30.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks similar to FireEye Inc (NASDAQ:FEYE). These stocks are National Health Investors Inc (NYSE:NHI), WD-40 Company (NASDAQ:WDFC), Companhia Siderurgica Nacional (NYSE:SID), Element Solutions Inc. (NYSE:ESI), 21Vianet Group Inc (NASDAQ:VNET), Equinox Gold Corp. (NYSE:EQX), and Turning Point Therapeutics, Inc. (NASDAQ:TPTX). This group of stocks' market values are similar to FEYE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NHI,15,94170,2 WDFC,15,187292,-2 SID,7,9332,2 ESI,37,411986,2 VNET,19,266431,4 EQX,14,122841,7 TPTX,30,524757,11 Average,19.6,230973,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $257 million in FEYE's case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. FireEye Inc (NASDAQ:FEYE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FEYE is 58.7. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately FEYE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FEYE were disappointed as the stock returned 4.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.