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Did Hedge Funds Make The Right Call On Viavi Solutions Inc (VIAV) ?

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 Viavi Solutions Inc (NASDAQ:VIAV) and determine whether the smart money was really smart about this stock.

Is Viavi Solutions Inc (NASDAQ:VIAV) going to take off soon? Investors who are in the know were in a pessimistic mood. The number of long hedge fund bets dropped by 6 recently. Our calculations also showed that VIAV 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). VIAV was in 31 hedge funds’ portfolios at the end of March. There were 37 hedge funds in our database with VIAV positions at the end of the previous quarter.

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

To most investors, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the moguls of this club, approximately 850 funds. It is estimated that this group of investors control most of the hedge fund industry’s total capital, and by shadowing their matchless stock picks, Insider Monkey has figured out numerous investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year 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 .

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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. Now we’re going to take a peek at the key hedge fund action surrounding Viavi Solutions Inc (NASDAQ:VIAV).

How are hedge funds trading Viavi Solutions Inc (NASDAQ:VIAV)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in VIAV a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Viavi Solutions Inc (NASDAQ:VIAV), which was worth $80 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $70.8 million worth of shares. Columbus Circle Investors, Toronado Partners, and Adage Capital Management 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 Toronado Partners allocated the biggest weight to Viavi Solutions Inc (NASDAQ:VIAV), around 7.09% of its 13F portfolio. Ratan Capital Group is also relatively very bullish on the stock, designating 2.06 percent of its 13F equity portfolio to VIAV.

Due to the fact that Viavi Solutions Inc (NASDAQ:VIAV) has faced falling interest from hedge fund managers, it’s easy to see that there were a few hedge funds that slashed their positions entirely by the end of the first quarter. Interestingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising about $26.7 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $10.8 million worth. These moves are interesting, as total hedge fund interest fell by 6 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Viavi Solutions Inc (NASDAQ:VIAV) but similarly valued. These stocks are CRISPR Therapeutics AG (NASDAQ:CRSP), Inovalon Holdings Inc (NASDAQ:INOV), Radian Group Inc (NYSE:RDN), and bluebird bio Inc (NASDAQ:BLUE). All of these stocks’ market caps are similar to VIAV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRSP 31 197848 1
INOV 15 71699 -1
RDN 28 121169 -1
BLUE 27 286752 -6
Average 25.25 169367 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $305 million in VIAV’s case. CRISPR Therapeutics AG (NASDAQ:CRSP) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 15 bullish hedge fund positions. Viavi Solutions Inc (NASDAQ:VIAV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 but beat the market by 15.5 percentage points. Unfortunately VIAV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VIAV were disappointed as the stock returned 13.6% during the same time period 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 many of these stocks already outperformed the market so far this year.

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