Is Cisco Systems, Inc. (NASDAQ:CSCO) undervalued? Investors who are in the know are in a pessimistic mood. The number of long hedge fund positions decreased by 4 lately.
To most shareholders, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds trading today, we look at the bigwigs of this group, about 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total asset base, and by watching their top investments, we have discovered a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per 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 outclassed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).
Just as important, optimistic insider trading sentiment is another way to break down the world of equities. As the old adage goes: there are a number of stimuli for a bullish insider to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this strategy if you understand where to look (learn more here).
With all of this in mind, it’s important to take a gander at the latest action regarding Cisco Systems, Inc. (NASDAQ:CSCO).
What have hedge funds been doing with Cisco Systems, Inc. (NASDAQ:CSCO)?
Heading into Q2, a total of 61 of the hedge funds we track held long positions in this stock, a change of -6% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly.
Of the funds we track, Donald Yacktman’s Yacktman Asset Management had the largest position in Cisco Systems, Inc. (NASDAQ:CSCO), worth close to $1.0965 billion, comprising 5.6% of its total 13F portfolio. The second largest stake is held by Jean-Marie Eveillard of First Eagle Investment Management, with a $880.6 million position; 2.9% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Ken Fisher’s Fisher Asset Management, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC and Kerr Neilson’s Platinum Asset Management.
Seeing as Cisco Systems, Inc. (NASDAQ:CSCO) has faced bearish sentiment from the smart money, we can see that there is a sect of money managers that decided to sell off their positions entirely in Q1. Interestingly, Bain Capital’s Brookside Capital cut the largest position of all the hedgies we key on, valued at about $124.4 million in stock.. Jim Simons’s fund, Renaissance Technologies, also sold off its stock, about $117.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in Q1.
How are insiders trading Cisco Systems, Inc. (NASDAQ:CSCO)?
Insider purchases made by high-level executives is at its handiest when the primary stock in question has seen transactions within the past half-year. Over the latest 180-day time frame, Cisco Systems, Inc. (NASDAQ:CSCO) has experienced zero unique insiders buying, and 10 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Cisco Systems, Inc. (NASDAQ:CSCO). These stocks are Finisar Corporation (NASDAQ:FNSR), Riverbed Technology, Inc. (NASDAQ:RVBD), Aruba Networks, Inc. (NASDAQ:ARUN), Palo Alto Networks Inc (NYSE:PANW), and Juniper Networks, Inc. (NYSE:JNPR). This group of stocks belong to the networking & communication devices industry and their market caps resemble CSCO’s market cap.