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Is Casa Systems, Inc. (CASA) A Good Stock To Buy?

Debasis Saha

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Casa Systems, Inc. (NASDAQ:CASA) based on that data.

Casa Systems, Inc. (NASDAQ:CASA) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that CASA isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_747612" align="aligncenter" width="400"] Eric Singer of VIEX Capital[/caption]

Eric Singer VIEX Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's analyze the new hedge fund action regarding Casa Systems, Inc. (NASDAQ:CASA).

How are hedge funds trading Casa Systems, Inc. (NASDAQ:CASA)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CASA over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CASA A Good Stock To Buy?

The largest stake in Casa Systems, Inc. (NASDAQ:CASA) was held by D E Shaw, which reported holding $1.1 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $1.1 million position. Other investors bullish on the company included Arrowstreet Capital, VIEX Capital Advisors, and Engineers Gate Manager. In terms of the portfolio weights assigned to each position Boardman Bay Capital Management allocated the biggest weight to Casa Systems, Inc. (NASDAQ:CASA), around 0.1% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to CASA.

Seeing as Casa Systems, Inc. (NASDAQ:CASA) has faced a decline in interest from the smart money, logic holds that there exists a select few hedge funds who were dropping their positions entirely in the first quarter. Interestingly, Eric Singer's VIEX Capital Advisors cut the biggest stake of the 750 funds tracked by Insider Monkey, valued at about $8.5 million in stock.  Renaissance Technologies, also sold off its stock, about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in the first quarter.

Let's now take a look at hedge fund activity in other stocks similar to Casa Systems, Inc. (NASDAQ:CASA). We will take a look at Watford Holdings Ltd. (NASDAQ:WTRE), REX American Resources Corp (NYSE:REX), Tenneco Inc (NYSE:TEN), and Tsakos Energy Navigation Ltd. (NYSE:TNP). This group of stocks' market caps resemble CASA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTRE,7,7810,0 REX,7,25263,-1 TEN,17,40519,-4 TNP,13,33143,3 Average,11,26684,-0.5 [/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 $27 million. That figure was $3 million in CASA's case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand Watford Holdings Ltd. (NASDAQ:WTRE) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Casa Systems, Inc. (NASDAQ:CASA) is even less popular than WTRE. Hedge funds clearly dropped the ball on CASA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on CASA as the stock returned 34.6% so far in the second quarter and outperformed the market by an even larger margin.

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

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