Should I Avoid Infinera Corp. (INFN)?

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 at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Infinera Corp. (NASDAQ:INFN).

Is Infinera Corp. (NASDAQ:INFN) a great stock to buy now? Prominent investors were becoming less confident. The number of bullish hedge fund positions were trimmed by 1 lately. Infinera Corp. (NASDAQ:INFN) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 31. Our calculations also showed that INFN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To most market participants, hedge funds are seen as unimportant, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, We choose to focus on the top tier of this club, approximately 850 funds. These investment experts control bulk of all hedge funds’ total capital, and by observing their best investments, Insider Monkey has brought to light numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Howard Marks of Oaktree Capital

Howard Marks of Oaktree Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. 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. With all of this in mind let’s take a peek at the fresh hedge fund action regarding Infinera Corp. (NASDAQ:INFN).

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

Heading into the second quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in INFN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Oaktree Capital Management held the most valuable stake in Infinera Corp. (NASDAQ:INFN), which was worth $242.4 million at the end of the fourth quarter. On the second spot was Greenhouse Funds which amassed $47 million worth of shares. Royce & Associates, Renaissance Technologies, and Greenhouse Funds were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Infinera Corp. (NASDAQ:INFN), around 5.05% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 3.72 percent of its 13F equity portfolio to INFN.

Seeing as Infinera Corp. (NASDAQ:INFN) has faced falling interest from the smart money, we can see that there were a few funds who sold off their entire stakes heading into Q2. It’s worth mentioning that Peter S. Park’s Park West Asset Management cut the largest position of the 750 funds followed by Insider Monkey, valued at an estimated $18.9 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $1.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to Infinera Corp. (NASDAQ:INFN). These stocks are Apollo Commercial Real Est. Finance Inc (NYSE:ARI), TechTarget Inc (NASDAQ:TTGT), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), Progress Software Corporation (NASDAQ:PRGS), Pretium Resources Inc (NYSE:PVG), McGrath RentCorp (NASDAQ:MGRC), and KAR Auction Services Inc (NYSE:KAR). All of these stocks’ market caps are closest to INFN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARI 11 44247 -7
TTGT 17 129279 -1
DRNA 27 294797 -2
PRGS 18 154642 2
PVG 22 154632 0
MGRC 13 66010 -7
KAR 22 161089 -5
Average 18.6 143528 -2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $373 million in INFN’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 11 bullish hedge fund positions. Infinera Corp. (NASDAQ:INFN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INFN is 51.5. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately INFN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INFN were disappointed as the stock returned -4.4% since the end of March (through 7/16) 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.