Hedge Funds Are Coming Back To NetGear, Inc. (NTGR)

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 NetGear, Inc. (NASDAQ:NTGR) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

NetGear, Inc. (NASDAQ:NTGR) investors should pay attention to an increase in hedge fund interest in recent months. NetGear, Inc. (NASDAQ:NTGR) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. Our calculations also showed that NTGR 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet 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. Now let’s take a look at the recent hedge fund action regarding NetGear, Inc. (NASDAQ:NTGR).

What have hedge funds been doing with NetGear, Inc. (NASDAQ:NTGR)?

Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in NTGR a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is NTGR A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Thomas E. Claugus’s GMT Capital has the most valuable position in NetGear, Inc. (NASDAQ:NTGR), worth close to $14.5 million, amounting to 0.8% of its total 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $5.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain John Overdeck and David Siegel’s Two Sigma Advisors, David Harding’s Winton Capital Management and Lee Ainslie’s Maverick Capital. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to NetGear, Inc. (NASDAQ:NTGR), around 0.82% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to NTGR.

Now, key hedge funds have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in NetGear, Inc. (NASDAQ:NTGR). Arrowstreet Capital had $5.1 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $1.4 million position during the quarter. The other funds with brand new NTGR positions are Renaissance Technologies, Michael Gelband’s ExodusPoint Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as NetGear, Inc. (NASDAQ:NTGR) but similarly valued. These stocks are Azure Power Global Limited (NYSE:AZRE), SpartanNash Company (NASDAQ:SPTN), Great Western Bancorp Inc (NYSE:GWB), DHT Holdings Inc (NYSE:DHT), Cellectis SA (NASDAQ:CLLS), Keros Therapeutics, Inc. (NASDAQ:KROS), and Accel Entertainment, Inc. (NYSE:ACEL). This group of stocks’ market caps are similar to NTGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZRE 3 10863 -1
SPTN 15 62843 1
GWB 18 27559 8
DHT 18 146575 -16
CLLS 13 34700 3
KROS 11 191729 11
ACEL 16 76007 -2
Average 13.4 78611 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $39 million in NTGR’s case. Great Western Bancorp Inc (NYSE:GWB) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks NetGear, Inc. (NASDAQ:NTGR) is more popular among hedge funds. Our overall hedge fund sentiment score for NTGR is 82.8. 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. 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 returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on NTGR as the stock returned 19% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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