Hedge Funds Are Dumping NetScout Systems, Inc. (NTCT)

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 NetScout Systems, Inc. (NASDAQ:NTCT) based on that data and determine whether they were really smart about the stock.

NetScout Systems, Inc. (NASDAQ:NTCT) was in 12 hedge funds’ portfolios at the end of March. NTCT investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 20 hedge funds in our database with NTCT holdings at the end of the previous quarter. Our calculations also showed that NTCT 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.

To the average investor there are dozens of indicators market participants use to assess their stock investments. Some of the less utilized indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the S&P 500 by a solid margin (see the details here).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

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 let’s check out the key hedge fund action surrounding NetScout Systems, Inc. (NASDAQ:NTCT).

Hedge fund activity in NetScout Systems, Inc. (NASDAQ:NTCT)

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NTCT over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of NetScout Systems, Inc. (NASDAQ:NTCT), with a stake worth $43.3 million reported as of the end of September. Trailing Fisher Asset Management was D E Shaw, which amassed a stake valued at $25.7 million. Arrowstreet Capital, Citadel Investment Group, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fisher Asset Management allocated the biggest weight to NetScout Systems, Inc. (NASDAQ:NTCT), around 0.05% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to NTCT.

Since NetScout Systems, Inc. (NASDAQ:NTCT) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that slashed their positions entirely in the first quarter. Interestingly, Noam Gottesman’s GLG Partners dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $3.8 million in stock, and Mika Toikka’s AlphaCrest Capital Management was right behind this move, as the fund dumped about $1.1 million worth. These moves are important to note, as total hedge fund interest was cut by 8 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to NetScout Systems, Inc. (NASDAQ:NTCT). These stocks are WPX Energy Inc (NYSE:WPX), PennyMac Financial Services Inc (NYSE:PFSI), PJT Partners Inc (NYSE:PJT), and Helmerich & Payne, Inc. (NYSE:HP). This group of stocks’ market values match NTCT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WPX 29 411632 -15
PFSI 24 210160 8
PJT 22 88247 2
HP 27 114660 -6
Average 25.5 206175 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $82 million in NTCT’s case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand PJT Partners Inc (NYSE:PJT) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks NetScout Systems, Inc. (NASDAQ:NTCT) is even less popular than PJT. Hedge funds dodged a bullet by taking a bearish stance towards NTCT. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 15.5 percentage points. Unfortunately NTCT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NTCT investors were disappointed as the stock returned 8% during the second quarter 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 most of these stocks already outperformed the market so far in 2020.

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