Was The Smart Money Right About F5 Networks, Inc. (FFIV)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is F5 Networks, Inc. (NASDAQ:FFIV), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

F5 Networks, Inc. (NASDAQ:FFIV) investors should be aware of an increase in hedge fund interest lately. F5 Networks, Inc. (NASDAQ:FFIV) was in 30 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that FFIV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 we’re going to analyze the new hedge fund action surrounding F5 Networks, Inc. (NASDAQ:FFIV).

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

Heading into the third quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FFIV over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in F5 Networks, Inc. (NASDAQ:FFIV) was held by Renaissance Technologies, which reported holding $354.6 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $108 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to F5 Networks, Inc. (NASDAQ:FFIV), around 1.14% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.96 percent of its 13F equity portfolio to FFIV.

As aggregate interest increased, key money managers were breaking ground themselves. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, assembled the most valuable position in F5 Networks, Inc. (NASDAQ:FFIV). Woodline Partners had $19.7 million invested in the company at the end of the quarter. Mikal Patel’s Oribel Capital Management also made a $9.6 million investment in the stock during the quarter. The other funds with brand new FFIV positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Ray Dalio’s Bridgewater Associates, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as F5 Networks, Inc. (NASDAQ:FFIV) but similarly valued. These stocks are Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Santander Consumer USA Holdings Inc (NYSE:SC), Levi Strauss & Co. (NYSE:LEVI), Floor & Decor Holdings, Inc. (NYSE:FND), Watsco Inc (NYSE:WSO), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Bunge Limited (NYSE:BG). This group of stocks’ market valuations are closest to FFIV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $705 million in FFIV’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. F5 Networks, Inc. (NASDAQ:FFIV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FFIV is 65.9. 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 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on FFIV as the stock returned 18.8% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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