Palo Alto Networks Inc (NYSE:PANW) investors should pay attention to an increase in hedge fund sentiment in recent months.
If you’d ask most stock holders, hedge funds are viewed as unimportant, outdated financial tools of yesteryear. While there are over 8000 funds trading at the moment, we hone in on the crème de la crème of this club, about 450 funds. It is estimated that this group controls the majority of the smart money’s total asset base, and by watching their top equity investments, we have unearthed a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Equally as integral, bullish insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are lots of incentives for an upper level exec to sell shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this method if piggybackers understand what to do (learn more here).
Now, it’s important to take a gander at the recent action surrounding Palo Alto Networks Inc (NYSE:PANW).
How are hedge funds trading Palo Alto Networks Inc (NYSE:PANW)?
In preparation for this year, a total of 13 of the hedge funds we track were long in this stock, a change of 18% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably.
According to our comprehensive database, Christopher Lord’s Criterion Capital had the biggest position in Palo Alto Networks Inc (NYSE:PANW), worth close to $57 million, comprising 3.1% of its total 13F portfolio. Coming in second is Empire Capital Management, managed by Scott Fine and Peter Richards, which held a $23 million position; 3.1% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Bain Capital’s Brookside Capital, Andrew Sandler’s Sandler Capital Management and Nick Niell’s Arrowgrass Capital Partners.
As aggregate interest increased, some big names were breaking ground themselves. Empire Capital Management, managed by Scott Fine and Peter Richards, initiated the most outsized position in Palo Alto Networks Inc (NYSE:PANW). Empire Capital Management had 23 million invested in the company at the end of the quarter. Nick Niell’s Arrowgrass Capital Partners also initiated a $13 million position during the quarter. The other funds with brand new PANW positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Dmitry Balyasny’s Balyasny Asset Management, and D. E. Shaw’s D E Shaw.
How are insiders trading Palo Alto Networks Inc (NYSE:PANW)?
Insider purchases made by high-level executives is most useful when the company in focus has seen transactions within the past half-year. Over the last six-month time period, Palo Alto Networks Inc (NYSE:PANW) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Palo Alto Networks Inc (NYSE:PANW). These stocks are Super Micro Computer, Inc. (NASDAQ:SMCI), Finisar Corporation (NASDAQ:FNSR), Juniper Networks, Inc. (NYSE:JNPR), Riverbed Technology, Inc. (NASDAQ:RVBD), and Aruba Networks, Inc. (NASDAQ:ARUN). All of these stocks are in the networking & communication devices industry and their market caps are similar to PANW’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Super Micro Computer, Inc. (NASDAQ:SMCI)||6||0||3|
|Finisar Corporation (NASDAQ:FNSR)||14||0||3|
|Juniper Networks, Inc. (NYSE:JNPR)||29||1||4|
|Riverbed Technology, Inc. (NASDAQ:RVBD)||23||0||5|
|Aruba Networks, Inc. (NASDAQ:ARUN)||15||0||7|
With the results demonstrated by our research, retail investors must always monitor hedge fund and insider trading activity, and Palo Alto Networks Inc (NYSE:PANW) shareholders fit into this picture quite nicely.