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 Facebook Inc (NASDAQ:FB) based on that data and determine whether they were really smart about the stock.
Facebook Inc (NASDAQ:FB) was in 210 hedge funds' portfolios at the end of June. The all time high for this statistics is 213 which was achieved at the end of the first quarter. Our calculations also showed that FB ranked #3 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.
Aaron Cowen of Suvretta Capital Management
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 ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we're going to analyze the fresh hedge fund action encompassing Facebook Inc (NASDAQ:FB).
What does smart money think about Facebook Inc (NASDAQ:FB)?
At second quarter's end, a total of 210 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -1% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FB over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chase Coleman's Tiger Global Management has the largest position in Facebook Inc (NASDAQ:FB), worth close to $1.987 billion, comprising 7.7% of its 13F portfolio. On Tiger Global's heels is Citadel Investment Group, managed by Ken Griffin, which holds a $1.8849 billion call position; 0.7% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions consist of Boykin Curry's Eagle Capital Management, Lone Pine Capital and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Facebook Inc (NASDAQ:FB), around 30.04% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, dishing out 24.96 percent of its 13F equity portfolio to FB.
Seeing as Facebook Inc (NASDAQ:FB) has witnessed declining sentiment from hedge fund managers, logic holds that there exists a select few hedgies who sold off their positions entirely in the second quarter. Interestingly, Andreas Halvorsen's Viking Global sold off the largest investment of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $335.1 million in stock. Anand Desai's fund, Darsana Capital Partners, also sold off its stock, about $250.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Facebook Inc (NASDAQ:FB) but similarly valued. We will take a look at Berkshire Hathaway Inc. (NYSE:BRK-B), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), JPMorgan Chase & Co. (NYSE:JPM), The Procter & Gamble Company (NYSE:PG), and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). This group of stocks' market caps are closest to FB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRK-B,107,15633556,-8 V,154,17010420,-3 JNJ,94,4731250,12 WMT,60,5829223,5 JPM,123,8732467,11 PG,73,9244143,-4 TSM,58,5209772,4 Average,95.6,9484404,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 95.6 hedge funds with bullish positions and the average amount invested in these stocks was $9.5 billion. That figure was $25.2 billion in FB's case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 58 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 98.6. 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 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 returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on FB as the stock returned 19.5% since the end of June 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.