Is Viavi Solutions Inc (VIAV) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Viavi Solutions Inc (NASDAQ:VIAV) based on that data.

Viavi Solutions Inc (NASDAQ:VIAV) has experienced an increase in activity from the world’s largest hedge funds in recent months. Viavi Solutions Inc (NASDAQ:VIAV) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 37. There were 27 hedge funds in our database with VIAV positions at the end of the fourth quarter. Our calculations also showed that VIAV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s check out the key hedge fund action regarding Viavi Solutions Inc (NASDAQ:VIAV).

Do Hedge Funds Think VIAV Is A Good Stock To Buy Now?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VIAV over the last 23 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.

Is VIAV A Good Stock To Buy?

The largest stake in Viavi Solutions Inc (NASDAQ:VIAV) was held by Arrowstreet Capital, which reported holding $65.2 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $42.5 million position. Other investors bullish on the company included Citadel Investment Group, Woodline Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position Deepcurrents Investment Group allocated the biggest weight to Viavi Solutions Inc (NASDAQ:VIAV), around 0.74% of its 13F portfolio. Woodline Partners is also relatively very bullish on the stock, dishing out 0.64 percent of its 13F equity portfolio to VIAV.

Consequently, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Viavi Solutions Inc (NASDAQ:VIAV). Marshall Wace LLP had $15.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $5.8 million position during the quarter. The following funds were also among the new VIAV investors: Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Qing Li’s Sciencast Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Viavi Solutions Inc (NASDAQ:VIAV) but similarly valued. These stocks are LivaNova PLC (NASDAQ:LIVN), Texas Capital Bancshares Inc (NASDAQ:TCBI), Altra Industrial Motion Corp. (NASDAQ:AIMC), First Hawaiian, Inc. (NASDAQ:FHB), Hillenbrand, Inc. (NYSE:HI), LivePerson, Inc. (NASDAQ:LPSN), and ChemoCentryx Inc (NASDAQ:CCXI). This group of stocks’ market values are similar to VIAV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LIVN 28 694228 -2
TCBI 29 300284 19
AIMC 18 34178 3
FHB 19 174114 5
HI 15 17557 2
LPSN 31 193585 -4
CCXI 20 385704 -3
Average 22.9 257093 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $282 million in VIAV’s case. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand Hillenbrand, Inc. (NYSE:HI) is the least popular one with only 15 bullish hedge fund positions. Viavi Solutions Inc (NASDAQ:VIAV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIAV is 69.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately VIAV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VIAV were disappointed as the stock returned 9.4% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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