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Is AUDC A Good Stock To Buy Now?

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Abigail Fisher
·6 min read
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of AudioCodes Ltd. (NASDAQ:AUDC).

Is AUDC a good stock to buy now? The smart money was selling. The number of long hedge fund bets fell by 3 lately. AudioCodes Ltd. (NASDAQ:AUDC) was in 9 hedge funds' portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that AUDC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

NAVELLIER & ASSOCIATES
NAVELLIER & ASSOCIATES

Louis Navellier of Navellier & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's analyze the latest hedge fund action regarding AudioCodes Ltd. (NASDAQ:AUDC).

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

At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AUDC over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Noked Capital held the most valuable stake in AudioCodes Ltd. (NASDAQ:AUDC), which was worth $14.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $4.1 million worth of shares. Renaissance Technologies, Navellier & Associates, and Two Sigma Advisors 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 Noked Capital allocated the biggest weight to AudioCodes Ltd. (NASDAQ:AUDC), around 9.46% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, dishing out 0.69 percent of its 13F equity portfolio to AUDC.

Since AudioCodes Ltd. (NASDAQ:AUDC) has witnessed a decline in interest from the aggregate hedge fund industry, it's safe to say that there exists a select few fund managers that decided to sell off their entire stakes heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest position of the 750 funds tracked by Insider Monkey, valued at about $16.1 million in stock, and Richard Mashaal's Rima Senvest Management was right behind this move, as the fund sold off about $1.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let's go over hedge fund activity in other stocks similar to AudioCodes Ltd. (NASDAQ:AUDC). We will take a look at Regenxbio Inc (NASDAQ:RGNX), Live Oak Bancshares Inc (NASDAQ:LOB), Universal Corp (NYSE:UVV), Lithium Americas Corp. (NYSE:LAC), The ODP Corporation (NASDAQ:ODP), TPI Composites, Inc. (NASDAQ:TPIC), and Covanta Holding Corporation (NYSE:CVA). All of these stocks' market caps are closest to AUDC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RGNX,22,144111,-1 LOB,10,40785,0 UVV,12,74834,-1 LAC,3,3349,2 ODP,18,182264,0 TPIC,20,103800,7 CVA,23,79339,2 Average,15.4,89783,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $26 million in AUDC's case. Covanta Holding Corporation (NYSE:CVA) is the most popular stock in this table. On the other hand Lithium Americas Corp. (NYSE:LAC) is the least popular one with only 3 bullish hedge fund positions. AudioCodes Ltd. (NASDAQ:AUDC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AUDC is 36.3. 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. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately AUDC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AUDC investors were disappointed as the stock returned -12.3% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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

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