Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
In this article, let’s take a closer look at A10 Networks Inc (NYSE:ATEN), which has seen an increase in enthusiasm from smart money of late. At the end of September, 16 investors tracked by Insider Monkey held shares of the company, up by three over the quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Healthways, Inc. (NASDAQ:HWAY), Modine Manufacturing Co. (NYSE:MOD), and Stoneridge, Inc. (NYSE:SRI) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s view the key action surrounding A10 Networks Inc (NYSE:ATEN).
How are hedge funds trading A10 Networks Inc (NYSE:ATEN)?
A total of 16 of the hedge funds tracked by Insider Monkey held long positions in A10 Networks at the end of September, a change of 23% from the second quarter of 2016. On the other hand, there were a total of 16 hedge funds with a bullish position in ATEN at the beginning of this year. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies has the number one position in A10 Networks Inc (NYSE:ATEN), worth close to $21 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Chuck Royce’s Royce & Associates holding a $11.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions contain D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Brian C. Freckmann’s Lyon Street Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, some big names were breaking ground themselves. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in A10 Networks Inc (NYSE:ATEN). Arrowstreet Capital had $0.5 million invested in the company at the end of the quarter. Paul Tudor Jones’ Tudor Investment Corp also initiated a $0.3 million position during the third quarter. The following funds were also among the new ATEN investors: Glenn Russell Dubin’s Highbridge Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as A10 Networks Inc (NYSE:ATEN) but similarly valued. These stocks are Healthways, Inc. (NASDAQ:HWAY), Modine Manufacturing Co. (NYSE:MOD), Stoneridge, Inc. (NYSE:SRI), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks’ market caps are closest to ATEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HWAY | 19 | 279048 | 1 |
| MOD | 10 | 43734 | -1 |
| SRI | 24 | 100450 | 3 |
| ARNA | 9 | 32610 | 0 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $62 million in ATEN’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the least popular one with only nine long hedge fund positions. A10 Networks Inc (NYSE:ATEN) registered a level of interest close to average, which is a slightly positive signal. However, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SRI might be a better candidate to consider taking a long position in.
Disclosure: none
