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Fortinet Inc (FTNT): Hedge Funds Rushing For The Exit Doors

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Fortinet Inc (NASDAQ:FTNT).

Fortinet Inc (NASDAQ:FTNT) was in 29 hedge funds’ portfolios at the end of March. FTNT shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 42 hedge funds in our database with FTNT positions at the end of the previous quarter. Our calculations also showed that FTNT 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 eyes of most market participants, hedge funds are seen as worthless, old investment vehicles of the past. While there are over 8000 funds trading today, Our experts choose to focus on the crème de la crème of this club, around 850 funds. These money managers handle the majority of the smart money’s total capital, and by tracking their inimitable equity investments, Insider Monkey has uncovered various investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per 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 .

Roger Ibbotson of Zebra Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the recent hedge fund action encompassing Fortinet Inc (NASDAQ:FTNT).

Hedge fund activity in Fortinet Inc (NASDAQ:FTNT)

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in FTNT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in Fortinet Inc (NASDAQ:FTNT) was held by Renaissance Technologies, which reported holding $613.5 million worth of stock at the end of September. It was followed by Whale Rock Capital Management with a $294 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to Fortinet Inc (NASDAQ:FTNT), around 11.23% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, designating 4.01 percent of its 13F equity portfolio to FTNT.

Judging by the fact that Fortinet Inc (NASDAQ:FTNT) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their positions entirely by the end of the first quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $38.1 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $33.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 13 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Fortinet Inc (NASDAQ:FTNT). We will take a look at Nokia Corporation (NYSE:NOK), Dollar Tree, Inc. (NASDAQ:DLTR), Citrix Systems, Inc. (NASDAQ:CTXS), and Alexandria Real Estate Equities Inc (NYSE:ARE). This group of stocks’ market valuations match FTNT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NOK 23 178356 7
DLTR 42 1353619 -9
CTXS 38 1418404 4
ARE 29 196351 8
Average 33 786683 2.5

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 $787 million. That figure was $1465 million in FTNT’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 23 bullish hedge fund positions. Fortinet Inc (NASDAQ:FTNT) 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on FTNT as the stock returned 37.6% 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.