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. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider F5 Networks, Inc. (NASDAQ:FFIV) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is FFIV a good stock to buy now? F5 Networks, Inc. (NASDAQ:FFIV) has seen a decrease in support from the world’s most elite money managers in recent months. F5 Networks, Inc. (NASDAQ:FFIV) was in 36 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 39. There were 39 hedge funds in our database with FFIV positions at the end of the second quarter. Our calculations also showed that FFIV isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we’re going to view the latest hedge fund action encompassing F5 Networks, Inc. (NASDAQ:FFIV).
Do Hedge Funds Think FFIV Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FFIV over the last 21 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in F5 Networks, Inc. (NASDAQ:FFIV) was held by Renaissance Technologies, which reported holding $389.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $91.9 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and AQR Capital Management. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to F5 Networks, Inc. (NASDAQ:FFIV), around 0.89% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, dishing out 0.73 percent of its 13F equity portfolio to FFIV.
Because F5 Networks, Inc. (NASDAQ:FFIV) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who sold off their full holdings last quarter. It’s worth mentioning that Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $25.6 million in stock, and George McCabe’s Portolan Capital Management was right behind this move, as the fund cut about $6.7 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as F5 Networks, Inc. (NASDAQ:FFIV) but similarly valued. We will take a look at JFrog Ltd. (NASDAQ:FROG), NRG Energy Inc (NYSE:NRG), RH (NYSE:RH), Sibanye Stillwater Limited (NYSE:SBSW), Alleghany Corporation (NYSE:Y), Service Corporation International (NYSE:SCI), and Owens Corning (NYSE:OC). This group of stocks’ market valuations match FFIV’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $807 million in FFIV’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand JFrog Ltd. (NASDAQ:FROG) is the least popular one with only 22 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. Our overall hedge fund sentiment score for FFIV is 63. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on FFIV as the stock returned 42.7% since the end of Q3 (through 12/18) 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.