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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 900 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 Ciena Corporation (NASDAQ:CIEN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Ciena Corporation (NASDAQ:CIEN) going to take off soon? Prominent investors were betting on the stock. The number of bullish hedge fund bets increased by 3 in recent months. Ciena Corporation (NASDAQ:CIEN) was in 27 hedge funds' portfolios at the end of March. The all time high for this statistic is 36. Our calculations also showed that CIEN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with CIEN holdings at the end of December.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Kerr Neilson of Platinum Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's check out the recent hedge fund action surrounding Ciena Corporation (NASDAQ:CIEN).
Do Hedge Funds Think CIEN Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CIEN over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Holocene Advisors was the largest shareholder of Ciena Corporation (NASDAQ:CIEN), with a stake worth $94.3 million reported as of the end of March. Trailing Holocene Advisors was Rima Senvest Management, which amassed a stake valued at $53.7 million. Platinum Asset Management, D E Shaw, and Cavalry Asset 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 Cavalry Asset Management allocated the biggest weight to Ciena Corporation (NASDAQ:CIEN), around 2.78% of its 13F portfolio. Cumberland Associates / Springowl Associates is also relatively very bullish on the stock, setting aside 2.67 percent of its 13F equity portfolio to CIEN.
Now, specific money managers have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, established the most valuable position in Ciena Corporation (NASDAQ:CIEN). ExodusPoint Capital had $10.9 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $2.4 million position during the quarter. The other funds with new positions in the stock are Jinghua Yan's TwinBeech Capital, Israel Englander's Millennium Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to Ciena Corporation (NASDAQ:CIEN). These stocks are US Foods Holding Corp. (NYSE:USFD), Marathon Oil Corporation (NYSE:MRO), Kinross Gold Corporation (NYSE:KGC), Gold Fields Limited (NYSE:GFI), Hyatt Hotels Corporation (NYSE:H), Juniper Networks, Inc. (NYSE:JNPR), and Gerdau SA (NYSE:GGB). This group of stocks' market values are similar to CIEN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position USFD,40,1489049,-4 MRO,29,423870,3 KGC,27,444920,-9 GFI,15,323946,0 H,23,666787,-4 JNPR,29,317158,-2 GGB,11,224795,-4 Average,24.9,555789,-2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $328 million in CIEN's case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 11 bullish hedge fund positions. Ciena Corporation (NASDAQ:CIEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CIEN is 58.1. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately CIEN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CIEN were disappointed as the stock returned 5.4% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.