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In this article we are going to use hedge fund sentiment as a tool and determine whether Facebook Inc (NASDAQ:FB) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Facebook Inc (NASDAQ:FB) has experienced an increase in hedge fund sentiment of late. Facebook Inc (NASDAQ:FB) was in 257 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 242. This means the bullish number of hedge fund positions in this stock reached a new all time high. There were 242 hedge funds in our database with FB holdings at the end of December. Our calculations also showed that FB ranked #1 among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most shareholders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation today, Our researchers look at the aristocrats of this group, about 850 funds. Most estimates calculate that this group of people orchestrate the lion's share of all hedge funds' total asset base, and by shadowing their finest stock picks, Insider Monkey has revealed a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. 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.
Masayoshi Son of SB Management
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Do Hedge Funds Think FB Is A Good Stock To Buy Now?
At Q1's end, a total of 257 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FB over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Facebook Inc (NASDAQ:FB), with a stake worth $3364.9 million reported as of the end of March. Trailing Citadel Investment Group was SB Management, which amassed a stake valued at $3181.8 million. Eagle Capital Management, Fundsmith LLP, and Lone Pine Capital 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 Immersion Capital allocated the biggest weight to Facebook Inc (NASDAQ:FB), around 32.87% of its 13F portfolio. Arrow Capital Management is also relatively very bullish on the stock, earmarking 26.5 percent of its 13F equity portfolio to FB.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Luxor Capital Group, managed by Christian Leone, initiated the largest call position in Facebook Inc (NASDAQ:FB). Luxor Capital Group had $674.3 million invested in the company at the end of the quarter. Chris Rokos's Rokos Capital Management also initiated a $286 million position during the quarter. The other funds with new positions in the stock are Robert Pitts's Steadfast Capital Management, Gabriel Plotkin's Melvin Capital Management, and Michael Burry's Scion Asset Management.
Let's check out hedge fund activity in other stocks similar to Facebook Inc (NASDAQ:FB). We will take a look at Tesla Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), and Johnson & Johnson (NYSE:JNJ). This group of stocks' market valuations are similar to FB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSLA,62,10013166,-6 BABA,135,15497689,-21 TSM,76,10870661,4 BRK-B,111,19880791,1 JPM,111,5253689,-1 V,164,26588103,-2 JNJ,81,6913373,0 Average,105.7,13573925,-3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 105.7 hedge funds with bullish positions and the average amount invested in these stocks was $13574 million. That figure was $40967 million in FB's case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 62 bullish hedge fund positions. Compared to these stocks Facebook Inc (NASDAQ:FB) is more popular among hedge funds. Our overall hedge fund sentiment score for FB is 100. 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. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on FB as the stock returned 12.5% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.