Should I Buy Ceragon Networks Ltd. (CRNT)?
We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Ceragon Networks Ltd. (NASDAQ:CRNT).
Hedge fund interest in Ceragon Networks Ltd. (NASDAQ:CRNT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CRNT 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as iCAD Inc (NASDAQ:ICAD), T2 Biosystems Inc (NASDAQ:TTOO), and Veritiv Corp (NYSE:VRTV) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.
John Overdeck of Two Sigma Advisors
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. Now let's view the latest hedge fund action regarding Ceragon Networks Ltd. (NASDAQ:CRNT).
What does smart money think about Ceragon Networks Ltd. (NASDAQ:CRNT)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRNT over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Ceragon Networks Ltd. (NASDAQ:CRNT), with a stake worth $7.8 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $2.8 million. Two Sigma Advisors, Engineers Gate Manager, and Millennium Management 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 Royce & Associates allocated the biggest weight to Ceragon Networks Ltd. (NASDAQ:CRNT), around 0.03% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to CRNT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks similar to Ceragon Networks Ltd. (NASDAQ:CRNT). These stocks are iCAD Inc (NASDAQ:ICAD), T2 Biosystems Inc (NASDAQ:TTOO), Veritiv Corp (NYSE:VRTV), WhiteHorse Finance, Inc. (NASDAQ:WHF), VIA optronics AG (NYSE:VIAO), Civista Bancshares, Inc. (NASDAQ:CIVB), and Alpha Pro Tech, Ltd. (NYSE:APT). All of these stocks' market caps are similar to CRNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICAD,14,31633,2 TTOO,4,562,0 VRTV,11,52963,1 WHF,3,1895,0 VIAO,10,8592,10 CIVB,11,7096,-1 APT,6,24429,-2 Average,8.4,18167,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $11 million in CRNT's case. iCAD Inc (NASDAQ:ICAD) is the most popular stock in this table. On the other hand WhiteHorse Finance, Inc. (NASDAQ:WHF) is the least popular one with only 3 bullish hedge fund positions. Ceragon Networks Ltd. (NASDAQ:CRNT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CRNT is 46.5. 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 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 31.6% in 2020 through December 2nd and beat the market by 16 percentage points. A small number of hedge funds were also right about betting on CRNT, though not to the same extent, as the stock returned 9.6% since the end of Q3 (through December 2nd) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
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