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Juniper Networks (JNPR): Hedge Funds Taking Some Chips Off The Table

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Juniper Networks, Inc. (NYSE:JNPR) and determine whether hedge funds skillfully traded this stock.

Juniper Networks, Inc. (NYSE:JNPR) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. Juniper Networks, Inc. (NYSE:JNPR) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 41. There were 34 hedge funds in our database with JNPR positions at the end of the first quarter. Our calculations also showed that JNPR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing Juniper Networks, Inc. (NYSE:JNPR).

How are hedge funds trading Juniper Networks, Inc. (NYSE:JNPR)?

At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JNPR over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Juniper Networks, Inc. (NYSE:JNPR), worth close to $114.9 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $79.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Ken Griffin’s Citadel Investment Group, Richard S. Pzena’s Pzena Investment Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to Juniper Networks, Inc. (NYSE:JNPR), around 3.71% of its 13F portfolio. Oribel Capital Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to JNPR.

Seeing as Juniper Networks, Inc. (NYSE:JNPR) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedgies who sold off their positions entirely heading into Q3. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $23 million in stock. John Murphy’s fund, Levin Easterly Partners, also cut its stock, about $12.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into Q3.

Let’s go over hedge fund activity in other stocks similar to Juniper Networks, Inc. (NYSE:JNPR). We will take a look at ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Perrigo Company plc (NYSE:PRGO), GCI Liberty, Inc. (NASDAQ:GLIBA), Snap-on Incorporated (NYSE:SNA), Trex Company, Inc. (NYSE:TREX), Iron Mountain Incorporated (NYSE:IRM), and Textron Inc. (NYSE:TXT). This group of stocks’ market valuations are closest to JNPR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACAD 44 2839807 16
PRGO 33 446972 5
GLIBA 53 2178205 4
SNA 20 358773 -6
TREX 28 221918 11
IRM 22 64987 3
TXT 24 267696 2
Average 32 911194 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $911 million. That figure was $559 million in JNPR’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 20 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 47.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately JNPR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JNPR were disappointed as the stock returned 10.3% 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 10 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.