Hedge Funds Are Dumping F5 Networks, Inc. (FFIV)

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not F5 Networks, Inc. (NASDAQ:FFIV) makes for a good investment right now.

Is F5 Networks, Inc. (NASDAQ:FFIV) worth your attention right now? The smart money was taking a pessimistic view. The number of long hedge fund bets retreated by 8 lately. F5 Networks, Inc. (NASDAQ:FFIV) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. Our calculations also showed that FFIV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a glance at the key hedge fund action encompassing F5 Networks, Inc. (NASDAQ:FFIV).

Do Hedge Funds Think FFIV Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FFIV over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in F5 Networks, Inc. (NASDAQ:FFIV) was held by Renaissance Technologies, which reported holding $500.1 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $139.1 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to F5 Networks, Inc. (NASDAQ:FFIV), around 1.35% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.62 percent of its 13F equity portfolio to FFIV.

Seeing as F5 Networks, Inc. (NASDAQ:FFIV) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies who were dropping their entire stakes heading into Q2. At the top of the heap, Paul Singer’s Elliott Investment Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, totaling about $78.7 million in stock, and Frank Fu’s CaaS Capital was right behind this move, as the fund sold off about $18.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q2.

Let’s go over hedge fund activity in other stocks similar to F5 Networks, Inc. (NASDAQ:FFIV). These stocks are Bentley Systems, Incorporated (NASDAQ:BSY), LKQ Corporation (NASDAQ:LKQ), Packaging Corporation Of America (NYSE:PKG), UWM Holdings Corporation (NYSE:UWMC), Textron Inc. (NYSE:TXT), Masimo Corporation (NASDAQ:MASI), and Teva Pharmaceutical Industries Limited (NYSE:TEVA). This group of stocks’ market values match FFIV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BSY 22 109974 3
LKQ 36 1543090 -14
PKG 29 245296 13
UWMC 19 76660 19
TXT 21 702168 -2
MASI 35 308604 6
TEVA 24 1119017 -2
Average 26.6 586401 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $872 million in FFIV’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand UWM Holdings Corporation (NYSE:UWMC) is the least popular one with only 19 bullish hedge fund positions. F5 Networks, Inc. (NASDAQ:FFIV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FFIV is 37.6. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately FFIV wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FFIV investors were disappointed as the stock returned -8.5% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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