If I were to ask you to guess what the most-hated stock among hedge funds was in the second quarter, you’d probably name a company that is suffering from financial difficulty.
But that is not the case. The stock that was most sold by hedge funds during the second quarter, according to 13F filings, was Facebook Inc. (NASDAQ:FB).
This conclusion is based on buying and selling data contained within Securities and Exchange Commission filings. It does not include short-selling data, which may give a different answer. This is not a gauge of how many investors are betting on a stock falling, but rather a measure of how many hedge funds are exiting positions in an individual company.
Still, it is interesting to note Facebook was the most sold stock among the biggest hedge funds last quarter.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Love-hate relationship” data-reactid=”28″>Love-hate relationship
What’s even more surprising is that as well as being the most sold stock, Facebook was also the most bought stock among large hedge funds last quarter.
In some respects, this data is misleading. As such a large company, almost every investment manager on Wall Street has some sort of view or position on the business. Nevertheless, it is interesting to see which hedge funds are doing a lot of buying and which are selling, as individual transaction data gives us an insight into individual managers’ investment styles and views on the business.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="What's interesting is that some of the most tech-focused funds were selling Facebook last quarter. Steve Mandel (Trades, Portfolio)‘s Lone Pine Capital, which has almost 30% of assets under management invested in its top five holdings, reduced its investment in Facebook by 38% to around 3 million shares or $580 million.” data-reactid=”31″>What’s interesting is that some of the most tech-focused funds were selling Facebook last quarter. Steve Mandel (Trades, Portfolio)‘s Lone Pine Capital, which has almost 30% of assets under management invested in its top five holdings, reduced its investment in Facebook by 38% to around 3 million shares or $580 million.
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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="David Tepper (Trades, Portfolio)’s Appaloosa Management was also a seller of Facebook during the three months to the end of June. The hedge fund reduced its position in the social network by 8%, though it still accounts for 16% of the overall equity portfolio.” data-reactid=”38″>David Tepper (Trades, Portfolio)’s Appaloosa Management was also a seller of Facebook during the three months to the end of June. The hedge fund reduced its position in the social network by 8%, though it still accounts for 16% of the overall equity portfolio.
What is particularly interesting with the activity from Lone Pine and Appaloosa is both hedge funds have only recently built positions in Facebook. For example, Lone Pine acquired virtually all of its position in the company in the fourth quarter of 2018.
During the quarter, the hedge fund acquired 2.8 million shares of the social network. It will be interesting to see the trading data for the third quarter to determine if the firm has continued to reduce its position.
Tepper only recently increased his position in Facebook as well. The hedge fund boosted its holding by 40% in the first quarter of 2019, but it now seems as if he is ready to take profits off the table looking at the 13F data for the second quarter.
It is important to remember these SEC filings only give us a small snapshot into the world of hedge funds and hedge fund managers. They are all so backward-looking, so they should not be used for trading purposes. The positions detailed within the filings could have been made at any point in the last three months, so they are not an accurate reflection of current investor sentiment.
That being said, what is notable is the fact these hedge fund managers are jumping out of positions in size. They don’t seem to be willing to hold on to their stakes in Facebook for more than a year, and that is extremely revealing. It could be the case they believe the company isn’t a sustainable long-term business model and, as a result, are trying to take advantage of short-term market movements.
That is only speculation, but what is clear is the fact these managers are trading in and out of Facebook. Maybe that is something to take advantage of?
Disclosure: The author owns no stocks mentioned.
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