Were Hedge Funds Right About Flocking Into Viavi Solutions Inc (VIAV) ?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Viavi Solutions Inc (NASDAQ:VIAV) from the perspective of those elite funds.

Is Viavi Solutions Inc (NASDAQ:VIAV) the right pick for your portfolio? Money managers are taking a bullish view. The number of long hedge fund positions inched up by 4 in recent months. Our calculations also showed that VIAV isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Glenn Russell Dubin of Highbridge Capital

Let’s analyze the new hedge fund action encompassing Viavi Solutions Inc (NASDAQ:VIAV).

How are hedge funds trading Viavi Solutions Inc (NASDAQ:VIAV)?

At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in VIAV a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Viavi Solutions Inc (NASDAQ:VIAV), worth close to $50.5 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Dorsal Capital Management, led by Ryan Frick and Oliver Evans, holding a $39.2 million position; 2.8% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions comprise Jim Simons’s Renaissance Technologies, Ken Fisher’s Fisher Asset Management and Israel Englander’s Millennium Management.

As aggregate interest increased, key money managers have jumped into Viavi Solutions Inc (NASDAQ:VIAV) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, created the largest position in Viavi Solutions Inc (NASDAQ:VIAV). Highbridge Capital Management had $14.9 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $10.4 million investment in the stock during the quarter. The following funds were also among the new VIAV investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Phill Gross and Robert Atchinson’s Adage Capital Management, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks similar to Viavi Solutions Inc (NASDAQ:VIAV). These stocks are Cleveland-Cliffs Inc (NYSE:CLF), California Water Service Group (NYSE:CWT), Corporate Office Properties Trust (NYSE:OFC), and Mercury Systems Inc (NASDAQ:MRCY). This group of stocks’ market values resemble VIAV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLF 29 314934 4
CWT 8 25843 5
OFC 23 137135 13
MRCY 6 19557 -5
Average 16.5 124367 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $175 million in VIAV’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand Mercury Systems Inc (NASDAQ:MRCY) is the least popular one with only 6 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 calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on VIAV as the stock returned 28% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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