It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Facebook Inc (NASDAQ:FB).
Is Facebook Inc (NASDAQ:FB) undervalued? The best stock pickers are actually turning bullish. The number of long hedge fund bets in Facebook inched up by 13 recently. FB was in 193 hedge funds’ portfolios at the end of the second quarter of 2018. There were 180 hedge funds in our database with FB holdings at the end of the previous quarter. Facebook was actually the most popular stock among hedge funds at the end of the second quarter (see the list of 25 most popular stocks among hedge funds).
However, this doesn’t mean that all hedge funds