Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Fastenal Company (NASDAQ:FAST) to find out whether there were any major changes in hedge funds’ views.
Is Fastenal Company (NASDAQ:FAST) a buy here? Investors who are in the know were taking a bullish view. The number of bullish hedge fund positions increased by 4 recently. Fastenal Company (NASDAQ:FAST) was in 38 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FAST isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Von Mueffling of Cantillon Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s check out the recent hedge fund action encompassing Fastenal Company (NASDAQ:FAST).
Do Hedge Funds Think FAST Is A Good Stock To Buy Now?
At Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in FAST a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Cantillon Capital Management held the most valuable stake in Fastenal Company (NASDAQ:FAST), which was worth $277.4 million at the end of the third quarter. On the second spot was Route One Investment Company which amassed $124.5 million worth of shares. D E Shaw, AQR Capital Management, and Arrowstreet Capital 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 Unio Capital allocated the biggest weight to Fastenal Company (NASDAQ:FAST), around 4.43% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, earmarking 3.27 percent of its 13F equity portfolio to FAST.
Consequently, specific money managers have jumped into Fastenal Company (NASDAQ:FAST) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Fastenal Company (NASDAQ:FAST). Arrowstreet Capital had $25.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $4.4 million position during the quarter. The following funds were also among the new FAST investors: Robert Pitts’s Steadfast Capital Management, Greg Poole’s Echo Street Capital Management, and Robert Pohly’s Samlyn Capital.
Let’s check out hedge fund activity in other stocks similar to Fastenal Company (NASDAQ:FAST). We will take a look at McCormick & Company, Incorporated (NYSE:MKC), Archer Daniels Midland Company (NYSE:ADM), BeiGene, Ltd. (NASDAQ:BGNE), Liberty Broadband Corp (NASDAQ:LBRDA), Align Technology, Inc. (NASDAQ:ALGN), TransDigm Group Incorporated (NYSE:TDG), and Fortive Corporation (NYSE:FTV). All of these stocks’ market caps match FAST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKC | 37 | 315538 | 5 |
| ADM | 26 | 673303 | -2 |
| BGNE | 13 | 5585118 | 0 |
| LBRDA | 25 | 862989 | 3 |
| ALGN | 47 | 2164625 | 6 |
| TDG | 64 | 6121503 | 2 |
| FTV | 34 | 1619893 | -1 |
| Average | 35.1 | 2477567 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $2478 million. That figure was $700 million in FAST’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 13 bullish hedge fund positions. Fastenal Company (NASDAQ:FAST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FAST is 63.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on FAST, though not to the same extent, as the stock returned 10.9% since Q3 (through December 18th) and outperformed the market as well.
Follow Fastenal Co (NASDAQ:FAST)
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Disclosure: None. This article was originally published at Insider Monkey.
