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Did Hedge Funds Make The Right Call On Citrix Systems, Inc. (CTXS) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. 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 we look at how hedge funds traded Citrix Systems, Inc. (NASDAQ:CTXS) and determine whether the smart money was really smart about this stock.

Citrix Systems, Inc. (NASDAQ:CTXS) was in 38 hedge funds’ portfolios at the end of March. CTXS investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 34 hedge funds in our database with CTXS holdings at the end of the previous quarter. Our calculations also showed that CTXS 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.

Paul Singer ELLIOTT MANAGEMENT

Paul Singer of Elliott Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s take a peek at the key hedge fund action surrounding Citrix Systems, Inc. (NASDAQ:CTXS).

What does smart money think about Citrix Systems, Inc. (NASDAQ:CTXS)?

At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in CTXS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CTXS A Good Stock To Buy?

The largest stake in Citrix Systems, Inc. (NASDAQ:CTXS) was held by SRS Investment Management, which reported holding $417.3 million worth of stock at the end of September. It was followed by Jericho Capital Asset Management with a $138.8 million position. Other investors bullish on the company included Citadel Investment Group, Scopia Capital, and Holocene Advisors. In terms of the portfolio weights assigned to each position Scopia Capital allocated the biggest weight to Citrix Systems, Inc. (NASDAQ:CTXS), around 11.29% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, setting aside 11.16 percent of its 13F equity portfolio to CTXS.

Consequently, some big names were leading the bulls’ herd. Jericho Capital Asset Management, managed by Josh Resnick, initiated the biggest position in Citrix Systems, Inc. (NASDAQ:CTXS). Jericho Capital Asset Management had $138.8 million invested in the company at the end of the quarter. Jonathan Soros’s JS Capital also made a $21.9 million investment in the stock during the quarter. The following funds were also among the new CTXS investors: Spencer M. Waxman’s Shannon River Fund Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Sahm Adrangi’s Kerrisdale Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Citrix Systems, Inc. (NASDAQ:CTXS) but similarly valued. We will take a look at Alexandria Real Estate Equities Inc (NYSE:ARE), TransDigm Group Incorporated (NYSE:TDG), Williams Companies, Inc. (NYSE:WMB), and Realty Income Corporation (NYSE:O). All of these stocks’ market caps are closest to CTXS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARE 29 196351 8
TDG 58 3800759 -5
WMB 47 552828 7
O 25 225190 -1
Average 39.75 1193782 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1194 million. That figure was $1418 million in CTXS’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 25 bullish hedge fund positions. Citrix Systems, Inc. (NASDAQ:CTXS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 and surpassed the market by 15.5 percentage points. Unfortunately CTXS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CTXS investors were disappointed as the stock returned 4.8% during the second 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.