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Did Hedge Funds Make The Right Call On Ciena Corporation (CIEN) ?

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 thoughtCiena Corporation (NASDAQ:CIEN) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Ciena Corporation (NASDAQ:CIEN) a marvelous investment right now? Investors who are in the know were becoming less confident. The number of bullish hedge fund positions were trimmed by 4 in recent months. Our calculations also showed that CIEN 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). CIEN was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with CIEN positions at the end of the previous quarter.

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

In the financial world there are many signals market participants employ to appraise stocks. Some of the most useful signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top fund managers can beat the broader indices by a very impressive margin (see the details here).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

With all of this in mind let’s check out the fresh hedge fund action regarding Ciena Corporation (NASDAQ:CIEN).

Hedge fund activity in Ciena Corporation (NASDAQ:CIEN)

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CIEN over the last 18 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.

Is CIEN A Good Stock To Buy?

The largest stake in Ciena Corporation (NASDAQ:CIEN) was held by D E Shaw, which reported holding $92 million worth of stock at the end of September. It was followed by AQR Capital Management with a $51.5 million position. Other investors bullish on the company included Holocene Advisors, Cavalry Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Ciena Corporation (NASDAQ:CIEN), around 4.51% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, dishing out 3.23 percent of its 13F equity portfolio to CIEN.

Seeing as Ciena Corporation (NASDAQ:CIEN) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that elected to cut their positions entirely last quarter. At the top of the heap, Noam Gottesman’s GLG Partners dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $11 million in stock, and Mike Masters’s Masters Capital Management was right behind this move, as the fund cut about $4.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Ciena Corporation (NASDAQ:CIEN). We will take a look at Reynolds Consumer Products Inc. (NASDAQ:REYN), Textron Inc. (NYSE:TXT), Watsco Inc (NYSE:WSO), and StoneCo Ltd. (NASDAQ:STNE). This group of stocks’ market valuations are similar to CIEN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REYN 17 267945 17
TXT 22 230265 -8
WSO 20 173809 -3
STNE 34 615449 5
Average 23.25 321867 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. That figure was $301 million in CIEN’s case. StoneCo Ltd. (NASDAQ:STNE) is the most popular stock in this table. On the other hand Reynolds Consumer Products Inc. (NASDAQ:REYN) is the least popular one with only 17 bullish hedge fund positions. Ciena Corporation (NASDAQ:CIEN) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CIEN as the stock returned 36% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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