What Facebook Inc (FB)’s Richest Investors Are Doing May Surprise You
Facebook Inc (NASDAQ:FB) has made headlines in recent weeks for flirting with its IPO price of $38 per share. As mobile advertising is improving and video ads begin their roll-out, the question remains: should investors stick with it, and hope for $45, even $50 per share by the end of 2013? Hedge funds are standing pat, more or less.
In today’s marketplace, there are plenty of indicators market participants can use to watch their holdings. Some of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best fund managers can outpace their index-focused peers by a healthy margin (see just how much).
Equally as necessary, positive insider trading sentiment is another way to look at the marketplace. Obviously, there are a variety of motivations for a corporate insider to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this method if you understand what to do (learn more here).
Furthermore, let's study the recent info about Facebook Inc (NASDAQ:FB).
What have hedge funds been doing with Facebook Inc (NASDAQ:FB)?
Heading into Q3, a total of 48 of the hedge funds we track were bullish in this stock, a change of -2% from one quarter earlier. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly.
Out of the hedge funds we follow, Stephen Mandel's Lone Pine Capital had the biggest position in Facebook Inc (NASDAQ:FB), worth close to $245.4 million, comprising 1.2% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which held a $132.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Steven Cohen's SAC Capital Advisors, Patrick McCormack's Tiger Consumer Management and Christopher R. Hansen's Valiant Capital.
As Facebook Inc (NASDAQ:FB) has faced dropping sentiment from upper-tier hedge fund managers, it's easy to see that there is a sect of funds that decided to sell off their positions entirely heading into Q2. Intriguingly, Jim Simons's Renaissance Technologies said goodbye to the largest investment of the 450+ funds we track, totaling about $102.9 million in stock. Leon Cooperman's fund, Omega Advisors, also said goodbye to its stock, about $93.8 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q2.
What have insiders been doing with Facebook Inc (NASDAQ:FB)?
Legal insider trading, particularly when it's bullish, is most useful when the company we're looking at has experienced transactions within the past six months. Over the latest 180-day time frame, Facebook Inc (NASDAQ:FB) has seen zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).
We'll also examine the relationship between both of these indicators in other stocks similar to Facebook Inc (NASDAQ:FB). These stocks are Yandex NV (NASDAQ:YNDX), Google Inc (NASDAQ:GOOG), LinkedIn Corp (NYSE:LNKD), Yahoo! Inc. (NASDAQ:YHOO), and Baidu.com, Inc. (ADR) (NASDAQ:BIDU). This group of stocks belong to the internet information providers industry and their market caps are similar to FB's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Yandex NV (NASDAQ:YNDX)
Google Inc (NASDAQ:GOOG)
LinkedIn Corp (NYSE:LNKD)
Yahoo! Inc. (NASDAQ:YHOO)
Baidu.com, Inc. (ADR) (NASDAQ:BIDU)
Using the results explained by Insider Monkey's research, average investors must always pay attention to hedge fund and insider trading activity, and Facebook Inc (NASDAQ:FB) applies perfectly to this mantra.