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Did Hedge Funds Make The Right Call On Juniper Networks, Inc. (JNPR) ?

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 Juniper Networks, Inc. (NYSE:JNPR) and determine whether the smart money was really smart about this stock.

Is Juniper Networks, Inc. (NYSE:JNPR) a bargain? Prominent investors were taking a bearish view. The number of long hedge fund bets went down by 3 recently. Our calculations also showed that JNPR 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.

To most market participants, hedge funds are perceived as slow, old financial tools of yesteryear. While there are more than 8000 funds in operation today, We look at the leaders of this group, approximately 850 funds. These hedge fund managers oversee most of all hedge funds’ total capital, and by monitoring their first-class investments, Insider Monkey has unearthed various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the new hedge fund action surrounding Juniper Networks, Inc. (NYSE:JNPR).

Hedge fund activity in Juniper Networks, Inc. (NYSE:JNPR)

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JNPR over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Juniper Networks, Inc. (NYSE:JNPR). Citadel Investment Group has a $134.4 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $72.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of D. E. Shaw’s D E Shaw, Richard S. Pzena’s Pzena Investment Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Diametric Capital allocated the biggest weight to Juniper Networks, Inc. (NYSE:JNPR), around 1.45% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, setting aside 0.54 percent of its 13F equity portfolio to JNPR.

Seeing as Juniper Networks, Inc. (NYSE:JNPR) has faced declining sentiment from the smart money, logic holds that there was a specific group of funds that decided to sell off their full holdings last quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $48.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $8.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Juniper Networks, Inc. (NYSE:JNPR). These stocks are LKQ Corporation (NASDAQ:LKQ), Formula One Group (NASDAQ:FWONK), Encompass Health Corporation (NYSE:EHC), and The Interpublic Group of Companies, Inc. (NYSE:IPG). This group of stocks’ market caps match JNPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LKQ 41 1132023 -11
FWONK 37 1125200 0
EHC 33 556709 4
IPG 21 594460 -5
Average 33 852098 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $852 million. That figure was $541 million in JNPR’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand The Interpublic Group of Companies, Inc. (NYSE:IPG) is the least popular one with only 21 bullish hedge fund positions. Juniper Networks, Inc. (NYSE:JNPR) 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 JNPR, though not to the same extent, as the stock returned 20.5% during the second quarter and outperformed the market as well.

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