Facebook Inc (NASDAQ:FB)’s rivalry with Twitter Inc (NYSE:TWTR) has taken a new turn as the former is building a new service very similar to Twitter’s platform, according to Business Insider citing an unnamed source. The source added that Facebook has enlisted a select group of companies to test a new mobile news application that will let organizations send a mobile notification to their followers with the goal of making news travel as fast as a tweet would. The application is, in fact, enabling the broadcast of tweet-like notifications made up of 100 characters and a link. For the service which is described as in the “alpha” stage, users will download a separate Facebook-made app and choose publications and topics termed as “stations” or “substations” to follow. The service is different from Facebook for Work project launched last year, Business Insider noted.
This latest development comes as Facebook Inc (NASDAQ:FB) is seen firing on all cylinders, taking advantage of possible catalysts such as video, virtual reality and Instagram, according to analysts. But how are smart money treating the stock? Hedge funds and other big money managers tend to have the largest amounts of their capital invested in large and mega-cap stocks like Facebook Inc (NASDAQ:FB) because these companies allow for much greater capital allocation. That’s why, if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests involving hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month on average, which showed that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of 123.1%, beating the broader market by over 66 percentage points (see more details).
Another important field Insider Monkey tracks are insider trades. However, for Facebook Inc (NASDAQ:FB) there have been no purchases of shares by insiders recorded since 2012. The most recent sale was by General Counsel Colin Stretch, who unloaded 1,000 shares on August 4. Meanwhile, Mike Schroepfer, Chief Technology Officer, disposed of a total of 100,000 shares this month. Considering this, we’re going to take a look at the latest hedge fund activity regarding Facebook.
How are hedge funds trading Facebook Inc (NASDAQ:FB)?
At the end of March, 129 of the hedge funds we follow were long on Facebook Inc (NASDAQ:FB), holding stakes with an aggregate value of $7.09 billion in holdings, up from 118 investors a quarter earlier. However, even though the number of hedge funds with investments in Facebook increased, there was a 10.27% quarter-over-quarter decline in the total value of their holdings, despite a 5.38% increase of the stock. Furthermore, only 3.08% of Facebook’s outstanding stock was held by the funds from our database.
Lone Pine Capital, managed by Stephen Mandel, held the largest position in Facebook Inc (NASDAQ:FB) at the end of the first quarter, which contained 8.11 million shares. Moreover, Jim Simons‘ Renaissance Technologies initiated a large position in the company by acquiring 2.65 million shares. On the other hand, Hoplite Capital Management, led by John Lykouretzos, closed its position by unloading 1.39 million shares in the first quarter.
Facebook Inc (NASDAQ:FB), as we can see, experienced an outflow of capital in the first quarter. However, it should be noted that morehedge funds are bullish on the stock. Furthermore, as we have covered in the past, industry experts think that the social network has a lot of room to grow, driven mostly by the potential of virtual reality, video and Instagram. Because of these, we still recommend a long position in Facebook.
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