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ZTE News Puts Oclaro, Inc. (OCLR) in the Spotlight

Traders are watching Oclaro, Inc. (NASDAQ:OCLR) after news broke that ZTE Corporation has pleaded ‘guilty’ for violating sanctions against Iran. Specifically, the Justice Department reported that the company admitted culpability to ‘llegally shipping U.S.-origin items to Iran, obstructing justice and making a material false statements’. In addition to its guilty plea, ZTE will pay a $287 million fine and forfeit $143.5 million more. The two fines bring the total amount ZTE has agreed to pay the U.S. government to around $892.4 million.


ZTE is a customer of Oclaro, Inc. (NASDAQ:OCLR), and ZTE’s overall financial health could affect Oclaro’s sales to a degree. Fortunately for Oclaro shareholders, the market expected the bad news already and already seems to have priced in the event.

What Next:

Given that ZTE is a major Chinese company, the conglomerate will be okay even with the fines, and it seems the market doesn’t think that the news will affect Oclaro much. For the most part, Oclaro isn’t as exposed to ZTE as other companies in the sector. Shares have soared in recent years due to fast growth, and Oclaro shares might continue to rise if the company’s earnings continue to blow away analyst estimates.

What does Smart Money Sentiment Say?

Our data shows that hedge fund sentiment has been relatively stable, at least between the third and fourth quarters. Of the 742 elite funds we track, 40 funds owned $245.33 million of Oclaro, Inc. (NASDAQ:OCLR) and accounted for 16.60% of the float on December 31, versus 41 funds and $247.62 million respectively on September 30.

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 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).


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