Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is FireEye Inc (NASDAQ:FEYE) the right investment to pursue these days? Money managers are getting more optimistic. The number of bullish hedge fund positions improved by 9 lately. Our calculations also showed that feye isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to review the new hedge fund action regarding FireEye Inc (NASDAQ:FEYE).
What have hedge funds been doing with FireEye Inc (NASDAQ:FEYE)?
Heading into the fourth quarter of 2018, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from the second quarter of 2018. On the other hand, there were a total of 22 hedge funds with a bullish position in FEYE at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in FireEye Inc (NASDAQ:FEYE), which was worth $95.8 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $75.5 million worth of shares. Moreover, Fisher Asset Management, Balyasny Asset Management, and Masters Capital Management were also bullish on FireEye Inc (NASDAQ:FEYE), allocating a large percentage of their portfolios to this stock.
Now, key money managers have jumped into FireEye Inc (NASDAQ:FEYE) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in FireEye Inc (NASDAQ:FEYE). Point72 Asset Management had $75.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $35.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Sander Gerber’s Hudson Bay Capital Management, and Mike Masters’s Masters Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FireEye Inc (NASDAQ:FEYE) but similarly valued. We will take a look at PIMCO Dynamic Credit and Mortgage Income Fund (NYSE:PCI), MFA Financial, Inc. (NYSE:MFA), Emergent Biosolutions Inc (NYSE:EBS), and Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). This group of stocks’ market valuations match FEYE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PCI | 2 | 3359 | 1 |
| MFA | 14 | 288754 | 1 |
| EBS | 16 | 219005 | 4 |
| MDGL | 26 | 575763 | 5 |
| Average | 14.5 | 271720 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $337 million in FEYE’s case. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the most popular stock in this table. On the other hand PIMCO Dynamic Credit Income Fund (NYSE:PCI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks FireEye Inc (NASDAQ:FEYE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
