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Are Hedge Funds Right About Fastenal Company (FAST)?

Reymerlyn Martin

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Fastenal Company (NASDAQ:FAST) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Fastenal Company (NASDAQ:FAST) was in 29 hedge funds' portfolios at the end of the second quarter of 2019. FAST investors should be aware of an increase in support from the world's most elite money managers lately. There were 21 hedge funds in our database with FAST positions at the end of the previous quarter. Our calculations also showed that FAST isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the key hedge fund action surrounding Fastenal Company (NASDAQ:FAST).

What have hedge funds been doing with Fastenal Company (NASDAQ:FAST)?

Heading into the third quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FAST over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FAST_oct2019

The largest stake in Fastenal Company (NASDAQ:FAST) was held by Route One Investment Company, which reported holding $529.5 million worth of stock at the end of March. It was followed by Bares Capital Management with a $282.8 million position. Other investors bullish on the company included Cantillon Capital Management, Park Presidio Capital, and Stevens Capital Management.

As aggregate interest increased, key money managers have jumped into Fastenal Company (NASDAQ:FAST) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, created the biggest position in Fastenal Company (NASDAQ:FAST). Stevens Capital Management had $14.9 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $14.9 million investment in the stock during the quarter. The following funds were also among the new FAST investors: Brandon Haley's Holocene Advisors, Peter Muller's PDT Partners, and David Harding's Winton Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fastenal Company (NASDAQ:FAST) but similarly valued. We will take a look at Incyte Corporation (NASDAQ:INCY), HEICO Corporation (NYSE:HEI), Church & Dwight Co., Inc. (NYSE:CHD), and Check Point Software Technologies Ltd. (NASDAQ:CHKP). This group of stocks' market caps match FAST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INCY,36,3728826,-3 HEI,35,1099994,9 CHD,30,338517,6 CHKP,24,666653,0 Average,31.25,1458498,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1458 million. That figure was $1155 million in FAST's case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand Check Point Software Technologies Ltd. (NASDAQ:CHKP) is the least popular one with only 24 bullish hedge fund positions. Fastenal Company (NASDAQ:FAST) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FAST wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FAST investors were disappointed as the stock returned 0.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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