Hedge Funds’ Cashing Out Of Ciena Corporation (CIEN) A Mistake?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Ciena Corporation (NYSE:CIEN)?

Ciena Corporation (NYSE:CIEN) investors should pay attention to a decrease in hedge fund interest in recent months. Our calculations also showed that CIEN 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In the eyes of most shareholders, hedge funds are viewed as slow, outdated financial tools of the past. While there are more than 8000 funds trading today, We look at the moguls of this group, about 850 funds. These money managers direct the lion’s share of the smart money’s total capital, and by tailing their first-class stock picks, Insider Monkey has figured out many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 fresh hedge fund action encompassing Ciena Corporation (NYSE:CIEN).

How are hedge funds trading Ciena Corporation (NYSE:CIEN)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CIEN over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Ciena Corporation (NYSE:CIEN) was held by D E Shaw, which reported holding $92 million worth of stock at the end of September. It was followed by AQR Capital Management with a $51.5 million position. Other investors bullish on the company included Holocene Advisors, Cavalry Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Ciena Corporation (NYSE:CIEN), around 4.51% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, designating 3.23 percent of its 13F equity portfolio to CIEN.

Judging by the fact that Ciena Corporation (NYSE:CIEN) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds who sold off their positions entirely in the first quarter. Intriguingly, Noam Gottesman’s GLG Partners cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $11 million in stock. Mike Masters’s fund, Masters Capital Management, also dropped its stock, about $4.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ciena Corporation (NYSE:CIEN) but similarly valued. We will take a look at Reynolds Consumer Products Inc. (NASDAQ:REYN), Textron Inc. (NYSE:TXT), Watsco Inc (NYSE:WSO), and StoneCo Ltd. (NASDAQ:STNE). All of these stocks’ market caps match CIEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REYN 17 267945 17
TXT 22 230265 -8
WSO 20 173809 -3
STNE 34 615449 5
Average 23.25 321867 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. That figure was $301 million in CIEN’s case. StoneCo Ltd. (NASDAQ:STNE) is the most popular stock in this table. On the other hand Reynolds Consumer Products Inc. (NASDAQ:REYN) is the least popular one with only 17 bullish hedge fund positions. Ciena Corporation (NYSE:CIEN) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on CIEN as the stock returned 38.8% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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