Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of A10 Networks Inc (NYSE:ATEN).
Is A10 Networks Inc (NYSE:ATEN) ready to rally soon? The best stock pickers are turning bullish. The number of bullish hedge fund positions improved by 2 lately. Our calculations also showed that ATEN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the recent hedge fund action surrounding A10 Networks Inc (NYSE:ATEN).
What does smart money think about A10 Networks Inc (NYSE:ATEN)?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in ATEN a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, VIEX Capital Advisors held the most valuable stake in A10 Networks Inc (NYSE:ATEN), which was worth $49.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $15.8 million worth of shares. Divisar Capital, Royce & Associates, and Lynrock Lake 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 VIEX Capital Advisors allocated the biggest weight to A10 Networks Inc (NYSE:ATEN), around 29.42% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, designating 8.7 percent of its 13F equity portfolio to ATEN.
As one would reasonably expect, specific money managers have jumped into A10 Networks Inc (NYSE:ATEN) headfirst. Fondren Management, managed by Bradley Louis Radoff, initiated the most outsized position in A10 Networks Inc (NYSE:ATEN). Fondren Management had $0.6 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also initiated a $0.2 million position during the quarter. The other funds with brand new ATEN positions are Israel Englander's Millennium Management and Andre F. Perold's HighVista Strategies.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as A10 Networks Inc (NYSE:ATEN) but similarly valued. These stocks are Gogo Inc (NASDAQ:GOGO), China Yuchai International Limited (NYSE:CYD), Ennis, Inc. (NYSE:EBF), and OrthoPediatrics Corp. (NASDAQ:KIDS). This group of stocks' market valuations match ATEN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOGO,17,104257,2 CYD,9,55431,0 EBF,11,68783,-1 KIDS,7,31059,-1 Average,11,64883,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $105 million in ATEN's case. Gogo Inc (NASDAQ:GOGO) is the most popular stock in this table. On the other hand OrthoPediatrics Corp. (NASDAQ:KIDS) is the least popular one with only 7 bullish hedge fund positions. A10 Networks Inc (NYSE:ATEN) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ATEN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATEN were disappointed as the stock returned -3.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.