Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: NetScout Systems, Inc. (NASDAQ:NTCT) .
NetScout Systems, Inc. (NASDAQ:NTCT) investors should pay attention to a decrease in enthusiasm from smart money in recent months. NTCT was in 20 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with NTCT holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as G-III Apparel Group, Ltd. (NASDAQ:GIII), Swift Transportation Co (NYSE:SWFT), and Press Ganey Holdings Inc (NYSE:PGND) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What have hedge funds been doing with NetScout Systems, Inc. (NASDAQ:NTCT)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a fall of 13% from the second quarter of 2016. On the other hand, there were a total of 29 hedge funds with a bullish position in NTCT at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, led by Ken Fisher, holds the largest position in NetScout Systems, Inc. (NASDAQ:NTCT). Fisher Asset Management has a $98.9 million position in the stock. The second most bullish fund manager is Pennant Capital Management, led by Alan Fournier, which holds a $58.7 million position; 2.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise Clint Carlson’s Carlson Capital, Glenn J. Krevlin’s Glenhill Advisors and Claus Moller’s P2 Capital Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. It’s worth mentioning that Craig C. Albert’s Sheffield Asset Management dropped the biggest stake of the 700 funds tracked by Insider Monkey, valued at close to $22.1 million in stock. Michael Pollack’s fund, Destrier Capital, also dropped its stock, about $5.6 million worth.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NetScout Systems, Inc. (NASDAQ:NTCT) but similarly valued. We will take a look at G-III Apparel Group, Ltd. (NASDAQ:GIII), Swift Transportation Co (NYSE:SWFT), Press Ganey Holdings Inc (NYSE:PGND), and Drew Industries, Inc. (NYSE:DW). This group of stocks’ market valuations are similar to NTCT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $331 million in NTCT’s case. Swift Transportation Co (NYSE:SWFT) is the most popular stock in this table. On the other hand G-III Apparel Group, Ltd. (NASDAQ:GIII) is the least popular one with only 11 bullish hedge fund positions. NetScout Systems, Inc. (NASDAQ:NTCT) 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. In this regard SWFT might be a better candidate to consider taking a long position in.