In this article we are going to use hedge fund sentiment as a tool and determine whether Juniper Networks, Inc. (NYSE:JNPR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is JNPR a good stock to buy? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets dropped by 3 recently. Juniper Networks, Inc. (NYSE:JNPR) was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. Our calculations also showed that JNPR 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding Juniper Networks, Inc. (NYSE:JNPR).
Do Hedge Funds Think JNPR Is A Good Stock To Buy Now?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in JNPR a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Juniper Networks, Inc. (NYSE:JNPR) was held by Renaissance Technologies, which reported holding $108 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $62.4 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to Juniper Networks, Inc. (NYSE:JNPR), around 3.43% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to JNPR.
Judging by the fact that Juniper Networks, Inc. (NYSE:JNPR) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that slashed their full holdings in the third quarter. Interestingly, Schonfeld Strategic Advisors cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $7.9 million in stock, and Greg Poole’s Echo Street Capital Management was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Juniper Networks, Inc. (NYSE:JNPR) but similarly valued. These stocks are Five Below Inc (NASDAQ:FIVE), Globant SA (NYSE:GLOB), Williams-Sonoma, Inc. (NYSE:WSM), Penumbra Inc (NYSE:PEN), First Solar, Inc. (NASDAQ:FSLR), Vereit Inc (NYSE:VER), and Cree, Inc. (NASDAQ:CREE). This group of stocks’ market values are closest to JNPR’s market value.
|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 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $472 million. That figure was $455 million in JNPR’s case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Vereit Inc (NYSE:VER) is the least popular one with only 18 bullish hedge fund positions. Juniper Networks, Inc. (NYSE:JNPR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JNPR is 47. 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 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately JNPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JNPR were disappointed as the stock returned 6.4% since the end of September (through 12/18) 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.
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Disclosure: None. This article was originally published at Insider Monkey.