Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Fortinet Inc (NASDAQ:FTNT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is FTNT a good stock to buy now? Investors who are in the know were getting less optimistic. The number of bullish hedge fund bets shrunk by 8 recently. Fortinet Inc (NASDAQ:FTNT) was in 36 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. Our calculations also showed that FTNT 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.
Alex Sacerdote of Whale Rock Capital Management
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. With all of this in mind we're going to take a peek at the latest hedge fund action surrounding Fortinet Inc (NASDAQ:FTNT).
Do Hedge Funds Think FTNT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FTNT over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fortinet Inc (NASDAQ:FTNT) was held by Renaissance Technologies, which reported holding $547 million worth of stock at the end of September. It was followed by Whale Rock Capital Management with a $230.2 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Park West Asset Management allocated the biggest weight to Fortinet Inc (NASDAQ:FTNT), around 2.44% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to FTNT.
Since Fortinet Inc (NASDAQ:FTNT) has experienced bearish sentiment from the smart money, it's easy to see that there were a few money managers that elected to cut their full holdings heading into Q4. It's worth mentioning that Ryan Caldwell's Chiron Investment Management dropped the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising about $16 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 8 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Fortinet Inc (NASDAQ:FTNT). We will take a look at Equifax Inc. (NYSE:EFX), Fortis Inc. (NYSE:FTS), Canadian Natural Resources Limited (NYSE:CNQ), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Coupa Software Incorporated (NASDAQ:COUP), First Republic Bank (NYSE:FRC), and Zscaler, Inc. (NASDAQ:ZS). All of these stocks' market caps match FTNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EFX,42,1266273,14 FTS,8,411986,0 CNQ,30,233173,2 TTWO,52,1289470,-9 COUP,50,3191469,0 FRC,31,1221714,-6 ZS,26,489528,-9 Average,34.1,1157659,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1158 million. That figure was $1292 million in FTNT's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 8 bullish hedge fund positions. Fortinet Inc (NASDAQ:FTNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FTNT is 53.4. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on FTNT as the stock returned 23.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.