In this article we are going to use hedge fund sentiment as a tool and determine whether Facebook Inc (NASDAQ:FB) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Facebook Inc (NASDAQ:FB) was in 230 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics was 213 prior to the third quarter of 2020. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. FB has experienced an increase in activity from the world’s largest hedge funds in recent months. There were 210 hedge funds in our database with FB holdings at the end of June. Our calculations also showed that FB 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.
According to most shareholders, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the moguls of this club, about 850 funds. It is estimated that this group of investors have their hands on the lion’s share of all hedge funds’ total capital, and by paying attention to their first-class picks, Insider Monkey has found a number of investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Scott Ferguson of Sachem Head Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we’re going to go over the new hedge fund action regarding Facebook Inc (NASDAQ:FB).
What does smart money think about Facebook Inc (NASDAQ:FB)?
At third quarter’s end, a total of 230 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in FB over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Facebook Inc (NASDAQ:FB). Citadel Investment Group has a $3.1727 billion call position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Tiger Global Management LLC, led by Chase Coleman, holding a $2.2918 billion position; 6.4% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Boykin Curry’s Eagle Capital Management, Lone Pine Capital and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Facebook Inc (NASDAQ:FB), around 34.3% of its 13F portfolio. Voleon Capital is also relatively very bullish on the stock, dishing out 23.91 percent of its 13F equity portfolio to FB.
As industrywide interest jumped, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the largest position in Facebook Inc (NASDAQ:FB). Citadel Investment Group had $758.4 million invested in the company at the end of the quarter. Eashwar Krishnan’s Tybourne Capital Management also initiated a $142.4 million position during the quarter. The other funds with new positions in the stock are Scott Ferguson’s Sachem Head Capital, Farhad Nanji and Michael DeMichele’s MFN Partners, and Jeffrey Altman’s Owl Creek Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Facebook Inc (NASDAQ:FB). These stocks are Visa Inc (NYSE:V), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), Tesla Inc. (NASDAQ:TSLA), Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG). This group of stocks’ market caps are similar to FB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| V | 160 | 18651052 | 6 |
| TSM | 67 | 7971678 | 9 |
| BRK-B | 109 | 19555477 | 2 |
| TSLA | 67 | 8176828 | 4 |
| WMT | 69 | 5492521 | 9 |
| JNJ | 82 | 4882436 | -12 |
| PG | 75 | 10091350 | 2 |
| Average | 89.9 | 10688763 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 89.9 hedge funds with bullish positions and the average amount invested in these stocks was $10689 million. That figure was $29337 million in FB’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 67 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 99. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Unfortunately FB wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on FB were disappointed as the stock returned 2.5% since the end of the third quarter (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
