You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Fastly, Inc. (NYSE:FSLY) was in 13 hedge funds' portfolios at the end of the second quarter of 2019. FSLY has experienced an increase in activity from the world's largest hedge funds in recent months. There were 0 hedge funds in our database with FSLY holdings at the end of the previous quarter. Our calculations also showed that FSLY isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. Let's take a glance at the fresh hedge fund action regarding Fastly, Inc. (NYSE:FSLY).
How have hedgies been trading Fastly, Inc. (NYSE:FSLY)?
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13 from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position 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.
[caption id="attachment_670343" align="aligncenter" width="473"] Colin Moran Abdiel Capital[/caption]
The largest stake in Fastly, Inc. (NYSE:FSLY) was held by Abdiel Capital Advisors, which reported holding $45.7 million worth of stock at the end of March. It was followed by Alyeska Investment Group with a $16 million position. Other investors bullish on the company included Tiger Global Management LLC, Driehaus Capital, and Whale Rock Capital Management.
Now, specific money managers have been driving this bullishness. Abdiel Capital Advisors, managed by Colin Moran, created the most outsized position in Fastly, Inc. (NYSE:FSLY). Abdiel Capital Advisors had $45.7 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $16 million investment in the stock during the quarter. The other funds with brand new FSLY positions are Chase Coleman's Tiger Global Management LLC, Richard Driehaus's Driehaus Capital, and Alex Sacerdote's Whale Rock Capital Management.
Let's go over hedge fund activity in other stocks similar to Fastly, Inc. (NYSE:FSLY). These stocks are Core-Mark Holding Company, Inc. (NASDAQ:CORE), 21Vianet Group Inc (NASDAQ:VNET), Amkor Technology, Inc. (NASDAQ:AMKR), and Jagged Peak Energy Inc. (NYSE:JAG). This group of stocks' market values are similar to FSLY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CORE,24,72451,0 VNET,17,51204,-1 AMKR,19,73105,-6 JAG,13,146861,1 Average,18.25,85905,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $97 million in FSLY's case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Jagged Peak Energy Inc. (NYSE:JAG) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Fastly, Inc. (NYSE:FSLY) is even less popular than JAG. Hedge funds clearly dropped the ball on FSLY as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on FSLY as the stock returned 18.3% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.