At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Ciena Corporation (NASDAQ:CIEN) a safe investment now? The best stock pickers are in a bearish mood. The number of long hedge fund positions were cut by 2 in recent months. At the end of this article we will also compare CIEN to other stocks including Paycom Software Inc (NYSE:PAYC), InterXion Holding NV (NYSE:INXN), and Nu Skin Enterprises, Inc. (NYSE:NUS) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Ciena Corporation (NASDAQ:CIEN)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 8% from the previous quarter. Sentiment has steadily fallen over the last year, with hedge fund ownership dropping by over 25% during that time. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Clint Carlson’s Carlson Capital has the largest position in Ciena Corporation (NASDAQ:CIEN), worth close to $91.6 million, accounting for 1.2% of its total 13F portfolio. On Carlson Capital’s heels is Renaissance Technologies, led by Jim Simons, holding a $40.7 million position. Remaining professional money managers that are bullish contain Anand Parekh’s Alyeska Investment Group, Mike Masters’ Masters Capital Management and Ken Griffin’s Citadel Investment Group.
Seeing as Ciena Corporation (NASDAQ:CIEN) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who were dropping their positions entirely heading into Q4. Interestingly, Ken Hahn’s Quentec Asset Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $8.8 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund cut about $5.1 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Ciena Corporation (NASDAQ:CIEN). These stocks are Paycom Software Inc (NYSE:PAYC), InterXion Holding NV (NYSE:INXN), Nu Skin Enterprises, Inc. (NYSE:NUS), and Ryman Hospitality Properties, Inc. (REIT) (NYSE:RHP). This group of stocks’ market caps resemble CIEN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $275 million in CIEN’s case. InterXion Holding NV (NYSE:INXN) is the most popular stock in this table. On the other hand Paycom Software Inc (NYSE:PAYC) is the least popular one with only 18 bullish hedge fund positions. Ciena Corporation (NASDAQ:CIEN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard INXN might be a better candidate to consider a long position in.