In this article you are going to find out whether hedge funds think Facebook Inc (NASDAQ:FB) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Facebook Inc (NASDAQ:FB) a buy right now? Investors who are in the know were cutting their exposure. The number of long hedge fund positions were trimmed by 18 in recent months. Facebook Inc (NASDAQ:FB) was in 248 hedge funds’ portfolios at the end of September. The all time high for this statistic is 266. Our calculations also showed that FB ranked #2 among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 266 hedge funds in our database with FB positions at the end of the second quarter.
Boykin Curry of Eagle Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding Facebook Inc (NASDAQ:FB).
Do Hedge Funds Think FB Is A Good Stock To Buy Now?
At Q3’s end, a total of 248 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FB over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable call position in Facebook Inc (NASDAQ:FB), worth close to $4.8063 billion, comprising 1% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $2.5762 billion position; 1.6% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish encompass Boykin Curry’s Eagle Capital Management, Terry Smith’s Fundsmith LLP and Rajiv Jain’s GQG Partners. In terms of the portfolio weights assigned to each position Arrow Capital Management allocated the biggest weight to Facebook Inc (NASDAQ:FB), around 31.56% of its 13F portfolio. Immersion Capital is also relatively very bullish on the stock, setting aside 27.04 percent of its 13F equity portfolio to FB.
Because Facebook Inc (NASDAQ:FB) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers who were dropping their full holdings heading into Q4. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital cut the largest stake of the 750 funds watched by Insider Monkey, totaling close to $595.6 million in call options, and Michael Burry’s Scion Asset Management was right behind this move, as the fund said goodbye to about $327.3 million worth. These moves are interesting, as total hedge fund interest fell by 18 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Facebook Inc (NASDAQ:FB) but similarly valued. These stocks are Tesla Inc. (NASDAQ:TSLA), Berkshire Hathaway Inc. (NYSE:BRK-B), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), and Johnson & Johnson (NYSE:JNJ). This group of stocks’ market valuations match FB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSLA | 60 | 10645154 | 0 |
| BRK-B | 106 | 19463815 | -10 |
| TSM | 67 | 9511459 | 3 |
| NVDA | 83 | 10050216 | -3 |
| JPM | 101 | 5635067 | -7 |
| V | 143 | 26169435 | -19 |
| JNJ | 88 | 6871782 | 0 |
| Average | 92.6 | 12620990 | -5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 92.6 hedge funds with bullish positions and the average amount invested in these stocks was $12621 million. That figure was $38570 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 60 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 97.5. 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 gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately FB wasn’t nearly as successful as these 5 stocks and hedge funds that were betting on FB were disappointed as the stock returned -4.4% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
