We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards F5 Networks, Inc. (NASDAQ:FFIV).
F5 Networks, Inc. (NASDAQ:FFIV) investors should pay attention to an increase in hedge fund sentiment of late. FFIV was in 29 hedge funds’ portfolios at the end of December. There were 25 hedge funds in our database with FFIV holdings at the end of the previous quarter. Our calculations also showed that FFIV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Hondros of AlphaOne Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when 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 go over the recent hedge fund action regarding F5 Networks, Inc. (NASDAQ:FFIV).
What have hedge funds been doing with F5 Networks, Inc. (NASDAQ:FFIV)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FFIV over the last 18 quarters. So, let’s check out 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 $400.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $232.9 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to F5 Networks, Inc. (NASDAQ:FFIV), around 3.58% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, earmarking 1.77 percent of its 13F equity portfolio to FFIV.
As industrywide interest jumped, key hedge funds have jumped into F5 Networks, Inc. (NASDAQ:FFIV) headfirst. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, initiated the largest position in F5 Networks, Inc. (NASDAQ:FFIV). Woodline Partners had $31.5 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $5.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Hondros’s AlphaOne Capital Partners, Nathan Przybylo’s L2 Asset Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as F5 Networks, Inc. (NASDAQ:FFIV) but similarly valued. These stocks are Masimo Corporation (NASDAQ:MASI), Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), Wayfair Inc (NYSE:W), and Service Corporation International (NYSE:SCI). This group of stocks’ market valuations are similar to FFIV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MASI | 30 | 171518 | 1 |
| JAZZ | 25 | 1192685 | -2 |
| W | 33 | 1500314 | -1 |
| SCI | 18 | 320390 | -2 |
| Average | 26.5 | 796227 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $796 million. That figure was $1185 million in FFIV’s case. Wayfair Inc (NYSE:W) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) is the least popular one with only 18 bullish hedge fund positions. F5 Networks, Inc. (NASDAQ:FFIV) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately FFIV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FFIV were disappointed as the stock returned -31.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
