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Did Hedge Funds Make The Right Call On A10 Networks Inc (ATEN) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtA10 Networks Inc (NYSE:ATEN) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

A10 Networks Inc (NYSE:ATEN) was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. ATEN shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 18 hedge funds in our database with ATEN positions at the end of the previous quarter. Our calculations also showed that ATEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing A10 Networks Inc (NYSE:ATEN).

How have hedgies been trading A10 Networks Inc (NYSE:ATEN)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in ATEN a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is ATEN A Good Stock To Buy?

Among these funds, VIEX Capital Advisors held the most valuable stake in A10 Networks Inc (NYSE:ATEN), which was worth $49 million at the end of the third quarter. On the second spot was Lynrock Lake which amassed $17.8 million worth of shares. Renaissance Technologies, Royce & Associates, and Divisar Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position VIEX Capital Advisors allocated the biggest weight to A10 Networks Inc (NYSE:ATEN), around 58.8% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, designating 9.43 percent of its 13F equity portfolio to ATEN.

Now, some big names were breaking ground themselves. Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, assembled the biggest position in A10 Networks Inc (NYSE:ATEN). Algert Coldiron Investors had $0.8 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new ATEN investors: Greg Eisner’s Engineers Gate Manager, Peter Muller’s PDT Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to A10 Networks Inc (NYSE:ATEN). We will take a look at Vermilion Energy Inc (NYSE:VET), RPT Realty (NYSE:RPT), Assembly Biosciences Inc (NASDAQ:ASMB), and Century Communities, Inc (NYSE:CCS). This group of stocks’ market valuations match ATEN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VET 8 1314 0
RPT 12 16984 -1
ASMB 18 179031 -2
CCS 17 56037 -6
Average 13.75 63342 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $110 million in ATEN’s case. Assembly Biosciences Inc (NASDAQ:ASMB) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks A10 Networks Inc (NYSE:ATEN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately ATEN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ATEN were disappointed as the stock returned 16.4% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.