In this article we will take a look at whether hedge funds think NetApp Inc. (NASDAQ:NTAP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is NTAP a good stock to buy now? NetApp Inc. (NASDAQ:NTAP) has experienced an increase in support from the world’s most elite money managers in recent months. NetApp Inc. (NASDAQ:NTAP) was in 31 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 33. Our calculations also showed that NTAP 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 surrounding NetApp Inc. (NASDAQ:NTAP).
Do Hedge Funds Think NTAP Is A Good Stock To Buy Now?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NTAP over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NetApp Inc. (NASDAQ:NTAP) was held by Renaissance Technologies, which reported holding $157.9 million worth of stock at the end of September. It was followed by D E Shaw with a $51.5 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Ariel Investments. In terms of the portfolio weights assigned to each position Breakline Capital allocated the biggest weight to NetApp Inc. (NASDAQ:NTAP), around 1.58% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.55 percent of its 13F equity portfolio to NTAP.
Now, specific money managers have jumped into NetApp Inc. (NASDAQ:NTAP) headfirst. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, established the largest position in NetApp Inc. (NASDAQ:NTAP). Woodline Partners had $5 million invested in the company at the end of the quarter. Kevin McCarthy’s Breakline Capital also initiated a $1.5 million position during the quarter. The following funds were also among the new NTAP investors: Jinghua Yan’s TwinBeech Capital, Benjamin A. Smith’s Laurion Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to NetApp Inc. (NASDAQ:NTAP). These stocks are Lamb Weston Holdings, Inc. (NYSE:LW), UDR, Inc. (NYSE:UDR), Brookfield Renewable Partners L.P. (NYSE:BEP), WPP Plc (NYSE:WPP), PTC Inc (NASDAQ:PTC), InterContinental Hotels Group PLC (NYSE:IHG), and Loews Corporation (NYSE:L). This group of stocks’ market valuations are similar to NTAP’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 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $429 million in NTAP’s case. PTC Inc (NASDAQ:PTC) is the most popular stock in this table. On the other hand WPP Plc (NYSE:WPP) is the least popular one with only 7 bullish hedge fund positions. NetApp Inc. (NASDAQ:NTAP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTAP is 75.7. 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 NTAP as the stock returned 49.5% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.