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Hedge Funds Are Coming Back To Extreme Networks, Inc (EXTR)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Extreme Networks, Inc (NASDAQ:EXTR) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Extreme Networks, Inc (NASDAQ:EXTR) has seen an increase in activity from the world’s largest hedge funds lately. Extreme Networks, Inc (NASDAQ:EXTR) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. Our calculations also showed that EXTR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

According to most investors, hedge funds are viewed as worthless, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, We look at the moguls of this group, about 850 funds. These hedge fund managers have their hands on most of all hedge funds’ total capital, and by keeping track of their first-class equity investments, Insider Monkey has formulated many investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped 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 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding Extreme Networks, Inc (NASDAQ:EXTR).

Hedge fund activity in Extreme Networks, Inc (NASDAQ:EXTR)

At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in EXTR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Extreme Networks, Inc (NASDAQ:EXTR) was held by D E Shaw, which reported holding $21.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $18.1 million position. Other investors bullish on the company included Millennium Management, Arrowstreet Capital, and Lion Point. In terms of the portfolio weights assigned to each position Cumberland Associates / Springowl Associates allocated the biggest weight to Extreme Networks, Inc (NASDAQ:EXTR), around 3.38% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to EXTR.

As industrywide interest jumped, key hedge funds have jumped into Extreme Networks, Inc (NASDAQ:EXTR) headfirst. PDT Partners, managed by Peter Muller, established the most valuable position in Extreme Networks, Inc (NASDAQ:EXTR). PDT Partners had $0.8 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $0.6 million position during the quarter. The other funds with brand new EXTR positions are Michael Gelband’s ExodusPoint Capital and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks similar to Extreme Networks, Inc (NASDAQ:EXTR). We will take a look at Global Medical REIT Inc. (NYSE:GMRE), WisdomTree Investments, Inc. (NASDAQ:WETF), Helix Energy Solutions Group Inc. (NYSE:HLX), Myers Industries, Inc. (NYSE:MYE), Groupon Inc (NASDAQ:GRPN), ProPetro Holding Corp. (NYSE:PUMP), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO). This group of stocks’ market values are similar to EXTR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GMRE 7 13738 -3
WETF 18 34977 -2
HLX 10 9854 0
MYE 11 91599 -2
GRPN 19 69863 1
PUMP 18 52445 5
LOCO 10 20267 1
Average 13.3 41820 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $68 million in EXTR’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Global Medical REIT Inc. (NYSE:GMRE) is the least popular one with only 7 bullish hedge fund positions. Extreme Networks, Inc (NASDAQ:EXTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXTR is 74.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately EXTR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EXTR were disappointed as the stock returned -7.4% in Q3 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.