We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 4 years and analyze what the smart money thinks of FireEye Inc (NASDAQ:FEYE) based on that data.
Is FireEye Inc (NASDAQ:FEYE) ready to rally soon? Money managers are taking an optimistic view. The number of bullish hedge fund positions advanced by 1 recently. Our calculations also showed that FEYE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Stark of Crosslink Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding FireEye Inc (NASDAQ:FEYE).
What have hedge funds been doing with FireEye Inc (NASDAQ:FEYE)?
At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in FEYE over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in FireEye Inc (NASDAQ:FEYE), which was worth $64.2 million at the end of the third quarter. On the second spot was Osterweis Capital Management which amassed $29.5 million worth of shares. Millennium Management, Fisher Asset Management, and D E Shaw 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 Boardman Bay Capital Management allocated the biggest weight to FireEye Inc (NASDAQ:FEYE), around 2.11% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, dishing out 2.04 percent of its 13F equity portfolio to FEYE.
With a general bullishness amongst the heavyweights, some big names have jumped into FireEye Inc (NASDAQ:FEYE) headfirst. ExodusPoint Capital, managed by Michael Gelband, created the largest position in FireEye Inc (NASDAQ:FEYE). ExodusPoint Capital had $4.7 million invested in the company at the end of the quarter. Seymour Sy Kaufman and Michael Stark’s Crosslink Capital also initiated a $3.1 million position during the quarter. The other funds with brand new FEYE positions are Donald Sussman’s Paloma Partners, John Murphy’s Levin Easterly Partners, and Mika Toikka’s AlphaCrest Capital Management.
Let’s go over hedge fund activity in other stocks similar to FireEye Inc (NASDAQ:FEYE). These stocks are Switch, Inc. (NYSE:SWCH), John Bean Technologies Corporation (NYSE:JBT), Physicians Realty Trust (NYSE:DOC), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD). This group of stocks’ market caps resemble FEYE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWCH | 18 | 303775 | 3 |
| JBT | 16 | 143502 | 1 |
| DOC | 11 | 94668 | -4 |
| CSOD | 29 | 725972 | 7 |
| Average | 18.5 | 316979 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $268 million in FEYE’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks FireEye Inc (NASDAQ:FEYE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately FEYE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FEYE were disappointed as the stock returned -30.9% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
