Fastenal Company (NASDAQ:FAST) surpassed Wall Streets’ earnings expectations for its second quarter with earnings per share of $0.48 on revenues of $997.83 million, although net sales came in lower than expectations. The market was expecting consensus earnings per share of $0.47 on net sales of $1 billion, as per eight analysts tracked by Zacks Investment Research. The shares of Fastenal Company (NASDAQ:FAST) closed 1.16% higher yesterday, expecting a strong quarterly report, but have slumped by 2.45% in trading this morning on the underwhelming results. On a year-over-year basis, the net earnings of the industrial supplies company were up by 7.5% to $140.36 million year-over-year. A similar pattern was observed in its quarterly net sales of $997.83 million, which were 5.0% higher year-over-year. The company reported that sales were down on weaker demand from industries involved in oil and gas exploration. Fastenal also mentioned signs of improvement with the market stabilizing in the past few months.
The shares of Fastenal Company (NASDAQ:FAST) have declined by 11.01% year-to-date, and these results are unlikely to enhance investor confidence much. The results are likely an unexpected disappointment for the smart money tracked by Insider Monkey, which was extremely bullish on the stock of the industrial supplies company earlier this year. 20 hedge fund managers had holdings valued at $261.82 million in the company on March 31, compared to 16 hedge fund investors holding just $89.89 million in shares three months earlier. The huge increase in holdings also came during a quarter in which shares dipped by 12%, making the increase of nearly 200% even more significant. Smart money clearly felt the floor had been reached, as the stock fell to a two-year low in late February. However, in the more than four months since then, it’s made only marginal gains from that low point (though gains nonetheless).
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
The insiders of Fastenal Company (NASDAQ:FAST) supposedly had the same idea as the smart money, as the number of insider purchases was up in the last six months. A total of nine insider purchase transactions were processed in 2015, with Rita Heise, Director at Fastenal Company, leading the list with a purchase of 2,400 shares on March 11. Michael Ancius, Director, and Lewis John Soderberg, Executive Vice President, were among other insiders purchasing shares of the company this year.
With all of this in mind, let’s take a look at the key hedge fund action surrounding Fastenal Company (NASDAQ:FAST).
Hedge fund activity in Fastenal Company (NASDAQ:FAST)
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of four from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings considerably.
According to hedge fund experts at Insider Monkey, Ken Griffin‘s Citadel Investment Group had the biggest position in Fastenal Company (NASDAQ:FAST), worth close to $71.3 million from 1.72 million shares, amounting to 0.1% of its total 13F portfolio. On Citadel Investment Group’s heels was Renaissance Technologies, led by Jim Simons, holding a $63.7 million position of 1.54 million shares; the fund also had 0.1% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Joel Greenblatt’s Gotham Asset Management, Israel Englander’s Millennium Management, and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).
Consequently, some big names were breaking ground themselves. Gotham Asset Management created the most valuable position in Fastenal Company (NASDAQ:FAST). Gotham Asset Management had $25.5 million invested in the company at the end of the quarter. Neil Chriss’ Hutchin Hill Capital also made a $12.4 million investment in the stock during the quarter. The other funds with brand new Fastenal positions were David E. Shaw’s D E Shaw and Greg Poole‘s Echo Street Capital Management.
With very positive hedge fund sentiment, motivated insiders, and acceptable quarterly results, we believe Fastenal is poised towards growth in the future and recommend buying on today’s weakness.
Disclosure: None
