With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Juniper Networks, Inc. (NYSE:JNPR).
Is Juniper Networks, Inc. (NYSE:JNPR) going to take off soon? The best stock pickers are becoming more confident. The number of long hedge fund positions increased by 2 in recent months. Our calculations also showed that JNPR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the recent hedge fund action regarding Juniper Networks, Inc. (NYSE:JNPR).
How are hedge funds trading Juniper Networks, Inc. (NYSE:JNPR)?
Heading into the fourth quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in JNPR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the largest position in Juniper Networks, Inc. (NYSE:JNPR). AQR Capital Management has a $127 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is David E. Shaw of D E Shaw, with a $94.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Renaissance Technologies, Richard S. Pzena's Pzena Investment Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Alight Capital allocated the biggest weight to Juniper Networks, Inc. (NYSE:JNPR), around 2.16% of its portfolio. Mondrian Capital is also relatively very bullish on the stock, dishing out 2.15 percent of its 13F equity portfolio to JNPR.
Consequently, key hedge funds were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized call position in Juniper Networks, Inc. (NYSE:JNPR). Balyasny Asset Management had $10 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $5.5 million position during the quarter. The following funds were also among the new JNPR investors: Ray Dalio's Bridgewater Associates, Dipak Patel's Alight Capital, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks similar to Juniper Networks, Inc. (NYSE:JNPR). These stocks are RenaissanceRe Holdings Ltd. (NYSE:RNR), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), F5 Networks, Inc. (NASDAQ:FFIV), and The Trade Desk, Inc. (NASDAQ:TTD). This group of stocks' market valuations resemble JNPR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNR,17,657683,-3 SPR,36,2062498,5 FFIV,22,1179111,-1 TTD,25,388607,1 Average,25,1071975,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1072 million. That figure was $637 million in JNPR's case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand RenaissanceRe Holdings Ltd. (NYSE:RNR) is the least popular one with only 17 bullish hedge fund positions. Juniper Networks, Inc. (NYSE:JNPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately JNPR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on JNPR were disappointed as the stock returned 2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.