Were Hedge Funds Illusioned With Fastenal Company (FAST)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Fastenal Company (NASDAQ:FAST) and determine whether hedge funds skillfully traded this stock.

Is Fastenal Company (NASDAQ:FAST) the right investment to pursue these days? Hedge funds were in an optimistic mood. The number of long hedge fund positions rose by 5 recently. Fastenal Company (NASDAQ:FAST) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that FAST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s view the recent hedge fund action surrounding Fastenal Company (NASDAQ:FAST).

David E. Shaw of D.E. Shaw

Do Hedge Funds Think FAST Is A Good Stock To Buy Now?

At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FAST over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Cantillon Capital Management held the most valuable stake in Fastenal Company (NASDAQ:FAST), which was worth $295.6 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $76.8 million worth of shares. D E Shaw, AQR Capital Management, and Marshall Wace LLP 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 3.97% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, dishing out 2.02 percent of its 13F equity portfolio to FAST.

As aggregate interest increased, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Fastenal Company (NASDAQ:FAST). Marshall Wace LLP had $24.7 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $13.1 million position during the quarter. The other funds with brand new FAST positions are Qing Li’s Sciencast Management, Dan Rasmussen’s Verdad Advisers, and Jinghua Yan’s TwinBeech Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fastenal Company (NASDAQ:FAST) but similarly valued. We will take a look at ArcelorMittal (NYSE:MT), Ecopetrol S.A. (NYSE:EC), Ball Corporation (NYSE:BLL), Lennar Corporation (NYSE:LEN), Fifth Third Bancorp (NASDAQ:FITB), Alexandria Real Estate Equities Inc (NYSE:ARE), and MPLX LP (NYSE:MPLX). This group of stocks’ market caps match FAST’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $609 million in FAST’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 6 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 61. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on FAST as the stock returned 9.8% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.