Hedge Funds Aren’t Crazy About NetGear, Inc. (NTGR) Anymore

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

NetGear, Inc. (NASDAQ:NTGR) shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 21 hedge funds in our database with NTGR positions at the end of the previous 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 Aircastle Limited (NYSE:AYR), Viavi Solutions Inc (NASDAQ:VIAV), and Caesars Acquisition Company (NASDAQ:CACQ) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

Now, we’re going to take a gander at the recent action surrounding NetGear, Inc. (NASDAQ:NTGR).

How have hedgies been trading NetGear, Inc. (NASDAQ:NTGR)?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 19% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards NTGR over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the most valuable position in NetGear, Inc. (NASDAQ:NTGR), worth close to $44.7 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $30.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Joel Greenblatt’s Gotham Asset Management, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management. 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.

Because NetGear, Inc. (NASDAQ:NTGR) has gone through bearish sentiment from the smart money, it’s easy to see that there was a specific group of money managers that slashed their positions entirely in the third quarter. Intriguingly, Neil Chriss’s Hutchin Hill Capital dumped the biggest stake of the 700 funds followed by Insider Monkey, comprising close to $1.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $0.6 million worth of NTGR shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NetGear, Inc. (NASDAQ:NTGR) but similarly valued. We will take a look at Aircastle Limited (NYSE:AYR), Viavi Solutions Inc (NASDAQ:VIAV), Caesars Acquisition Company (NASDAQ:CACQ), and Mobile Mini Inc (NASDAQ:MINI). This group of stocks’ market valuations match NTGR’s market valuation.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $139 million in NTGR’s case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Mobile Mini Inc (NASDAQ:MINI) is the least popular one with only 8 bullish hedge fund positions. NetGear, Inc. (NASDAQ:NTGR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard VIAV might be a better candidate to consider taking a long position in.

Disclosure: none.