Is Ciena Corporation (NASDAQ:CIEN) a safe stock to buy now? Prominent investors are getting less optimistic. The number of long hedge fund bets were trimmed by 4 recently.
To most traders, hedge funds are assumed to be underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation at present, we look at the upper echelon of this club, around 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total capital, and by keeping an eye on their highest performing stock picks, we have found a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (see the details here).
Equally as beneficial, bullish insider trading sentiment is another way to break down the investments you’re interested in. As the old adage goes: there are many stimuli for an executive to sell shares of his or her company, but just one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this strategy if shareholders understand what to do (learn more here).
Now, we’re going to take a peek at the recent action encompassing Ciena Corporation (NASDAQ:CIEN).
How are hedge funds trading Ciena Corporation (NASDAQ:CIEN)?
At year’s end, a total of 15 of the hedge funds we track held long positions in this stock, a change of -21% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially.
Of the funds we track, Platinum Asset Management, managed by Kerr Neilson, holds the largest position in Ciena Corporation (NASDAQ:CIEN). Platinum Asset Management has a $105 million position in the stock, comprising 2.3% of its 13F portfolio. The second largest stake is held by Daruma Asset Management, managed by Mariko Gordon, which held a $34 million position; 0% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Ken Griffin’s Citadel Investment Group, and Chuck Royce’s Royce & Associates.
Judging by the fact that Ciena Corporation (NASDAQ:CIEN) has experienced declining sentiment from the smart money, it’s easy to see that there was a specific group of money managers who were dropping their entire stakes heading into 2013. At the top of the heap, John Thaler’s JAT Capital Management cut the largest investment of all the hedgies we track, valued at an estimated $50 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund dropped about $1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds heading into 2013.
How have insiders been trading Ciena Corporation (NASDAQ:CIEN)?
Insider trading activity, especially when it’s bullish, is most useful when the company in focus has seen transactions within the past six months. Over the last 180-day time period, Ciena Corporation (NASDAQ:CIEN) has seen zero unique insiders buying, and 12 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Ciena Corporation (NASDAQ:CIEN). These stocks are NetGear, Inc. (NASDAQ:NTGR), Exelis Inc (NYSE:XLS), Acme Packet, Inc. (NASDAQ:APKT), Loral Space & Communications Ltd. (NASDAQ:LORL), and Arris Group, Inc. (NASDAQ:ARRS). This group of stocks are the members of the communication equipment industry and their market caps are similar to CIEN’s market cap.