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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Fastenal Company (NASDAQ:FAST).
Is Fastenal Company (NASDAQ:FAST) the right pick for your portfolio? Money managers are buying. The number of bullish hedge fund positions inched up by 3 recently. Our calculations also showed that FAST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). FAST was in 33 hedge funds’ portfolios at the end of December. There were 30 hedge funds in our database with FAST positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Louis Bacon Moore of Moore 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. Now let’s take a glance at the fresh hedge fund action surrounding Fastenal Company (NASDAQ:FAST).
How have hedgies been trading Fastenal Company (NASDAQ:FAST)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FAST over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, William Duhamel’s Route One Investment Company has the biggest position in Fastenal Company (NASDAQ:FAST), worth close to $447.2 million, accounting for 12.6% of its total 13F portfolio. Sitting at the No. 2 spot is Cantillon Capital Management, managed by William von Mueffling, which holds a $228.3 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Brian Bares’s Bares Capital Management, Bryan Hinmon’s Motley Fool Asset Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Route One Investment Company allocated the biggest weight to Fastenal Company (NASDAQ:FAST), around 12.63% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, designating 4.71 percent of its 13F equity portfolio to FAST.
As aggregate interest increased, some big names were leading the bulls’ herd. Kingdon Capital, managed by Mark Kingdon, established the biggest position in Fastenal Company (NASDAQ:FAST). Kingdon Capital had $10 million invested in the company at the end of the quarter. Schonfeld Strategic Advisors also made a $7.9 million investment in the stock during the quarter. The following funds were also among the new FAST investors: Louis Bacon’s Moore Global Investments, Javier Velazquez’s Albar Capital, and Ray Dalio’s Bridgewater Associates.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Fastenal Company (NASDAQ:FAST) but similarly valued. These stocks are Ball Corporation (NYSE:BLL), Copart, Inc. (NASDAQ:CPRT), Ameriprise Financial, Inc. (NYSE:AMP), and IAC/InterActiveCorp (NASDAQ:IAC). This group of stocks’ market valuations match FAST’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLL | 44 | 679601 | 10 |
| CPRT | 46 | 984642 | 3 |
| AMP | 37 | 1122580 | 8 |
| IAC | 71 | 3319257 | 16 |
| Average | 49.5 | 1526520 | 9.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.5 hedge funds with bullish positions and the average amount invested in these stocks was $1527 million. That figure was $835 million in FAST’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks Fastenal Company (NASDAQ:FAST) is even less popular than AMP. Hedge funds clearly dropped the ball on FAST as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on FAST as the stock returned -13.6% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
