Do Hedge Funds Love Ribbon Communications Inc. (RBBN)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Ribbon Communications Inc. (NASDAQ:RBBN) based on that data and determine whether they were really smart about the stock.

Ribbon Communications Inc. (NASDAQ:RBBN) was in 11 hedge funds’ portfolios at the end of March. RBBN investors should be aware of an increase in hedge fund sentiment of late. There were 9 hedge funds in our database with RBBN holdings at the end of the previous quarter. Our calculations also showed that RBBN 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Ken Griffin of Citadel Investment Group

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 we’re going to take a look at the new hedge fund action regarding Ribbon Communications Inc. (NASDAQ:RBBN).

What does smart money think about Ribbon Communications Inc. (NASDAQ:RBBN)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in RBBN a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Ribbon Communications Inc. (NASDAQ:RBBN) was held by Renaissance Technologies, which reported holding $4.7 million worth of stock at the end of September. It was followed by D E Shaw with a $3.5 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position HighVista Strategies allocated the biggest weight to Ribbon Communications Inc. (NASDAQ:RBBN), around 0.07% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to RBBN.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most outsized position in Ribbon Communications Inc. (NASDAQ:RBBN). Millennium Management had $2.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to Ribbon Communications Inc. (NASDAQ:RBBN). We will take a look at MTS Systems Corporation (NASDAQ:MTSC), Heidrick & Struggles International, Inc. (NASDAQ:HSII), Denny’s Corporation (NASDAQ:DENN), and Bluegreen Vacations Corporation (NYSE:BXG). This group of stocks’ market caps are closest to RBBN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTSC 14 33819 4
HSII 13 83980 -2
DENN 20 50592 -1
BXG 7 2126 -1
Average 13.5 42629 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $19 million in RBBN’s case. Denny’s Corporation (NASDAQ:DENN) is the most popular stock in this table. On the other hand Bluegreen Vacations Corporation (NYSE:BXG) is the least popular one with only 7 bullish hedge fund positions. Ribbon Communications Inc. (NASDAQ:RBBN) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on RBBN as the stock returned 29.7% during the second quarter and outperformed the market by an even larger margin.

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