Is Palo Alto Networks Inc (NYSE:PANW) the right pick for your portfolio? Hedge funds are getting more optimistic. The number of bullish hedge fund bets improved by 7 lately.
If you’d ask most market participants, hedge funds are seen as worthless, old investment tools of years past. While there are over 8000 funds in operation at present, we choose to focus on the leaders of this club, around 450 funds. It is estimated that this group oversees most of the smart money’s total asset base, and by watching their best equity investments, we have determined a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed 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 topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Equally as important, optimistic insider trading activity is another way to break down the stock market universe. As the old adage goes: there are plenty of reasons for an executive to downsize shares of his or her company, but only one, very obvious reason why they would behave bullishly. Many empirical studies have demonstrated the impressive potential of this tactic if piggybackers understand what to do (learn more here).
Consequently, let’s take a peek at the latest action encompassing Palo Alto Networks Inc (NYSE:PANW).
What does the smart money think about Palo Alto Networks Inc (NYSE:PANW)?
At Q1’s end, a total of 20 of the hedge funds we track were bullish in this stock, a change of 54% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably.
When looking at the hedgies we track, Christopher Lord’s Criterion Capital had the biggest position in Palo Alto Networks Inc (NYSE:PANW), worth close to $143.1 million, comprising 5.3% of its total 13F portfolio. The second largest stake is held by Columbus Circle Investors, managed by Donald Chiboucis, which held a $29 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that are bullish include Noam Gottesman’s GLG Partners, Ryan Frick and Oliver Evans’s Dorsal Capital Management and Eric Bannasch’s Cadian Capital.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Columbus Circle Investors, managed by Donald Chiboucis, assembled the most outsized position in Palo Alto Networks Inc (NYSE:PANW). Columbus Circle Investors had 29 million invested in the company at the end of the quarter. Ryan Frick and Oliver Evans’s Dorsal Capital Management also initiated a $19.8 million position during the quarter. The other funds with brand new PANW positions are Eric Bannasch’s Cadian Capital, Matthew Iorio’s White Elm Capital, and David Goel and Paul Ferri’s Matrix Capital Management.
How have insiders been trading Palo Alto Networks Inc (NYSE:PANW)?
Insider purchases made by high-level executives is best served when the company in focus has seen transactions within the past half-year. Over the latest half-year time period, Palo Alto Networks Inc (NYSE:PANW) has experienced zero unique insiders buying, 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). This group of stocks are the members of the networking & communication devices industry and their market caps resemble PANW’s market cap.