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Ceragon Networks Ltd. (CRNT): Are Hedge Funds Right About This Stock?

Asma UL Husna

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Ceragon Networks Ltd. (NASDAQ:CRNT) based on those filings.

Is Ceragon Networks Ltd. (NASDAQ:CRNT) a buy here? Hedge funds are taking a bearish view. The number of bullish hedge fund positions went down by 1 recently. Our calculations also showed that CRNT 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). CRNT was in 3 hedge funds' portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with CRNT holdings at the end of the previous quarter. 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 44 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_26044" align="aligncenter" width="359"] Ken Griffin of Citadel Investment Group[/caption]

Ken Griffin CITADEL INVESTMENT GROUP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a glance at the key hedge fund action encompassing Ceragon Networks Ltd. (NASDAQ:CRNT).

How are hedge funds trading Ceragon Networks Ltd. (NASDAQ:CRNT)?

At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in CRNT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Ceragon Networks Ltd. (NASDAQ:CRNT), which was worth $4.2 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $0.2 million worth of shares. Citadel Investment Group was 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 Renaissance Technologies allocated the biggest weight to Ceragon Networks Ltd. (NASDAQ:CRNT), around 0.004% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0007 percent of its 13F equity portfolio to CRNT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CRNT as a viable investment and initiated a position in the stock.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ceragon Networks Ltd. (NASDAQ:CRNT) but similarly valued. These stocks are Cassava Sciences, Inc. (NASDAQ:SAVA), Sutter Rock Capital Corp. (NASDAQ:SSSS), Middlefield Banc Corp. (NASDAQ:MBCN), and Gamida Cell Ltd. (NASDAQ:GMDA). This group of stocks' market values are similar to CRNT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAVA,5,7572,0 SSSS,8,8303,0 MBCN,4,10830,-1 GMDA,5,7222,0 Average,5.5,8482,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $4 million in CRNT's case. Sutter Rock Capital Corp. (NASDAQ:SSSS) is the most popular stock in this table. On the other hand Middlefield Banc Corp. (NASDAQ:MBCN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Ceragon Networks Ltd. (NASDAQ:CRNT) is even less popular than MBCN. Hedge funds clearly dropped the ball on CRNT 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on CRNT as the stock returned 84.1% so far in the second quarter and outperformed the market by an even larger margin.

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

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