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 second 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 5 years and analyze what the smart money thinks of Ciena Corporation (NASDAQ:CIEN) based on that data and determine whether they were really smart about the stock.
Is Ciena Corporation (NASDAQ:CIEN) a buy, sell, or hold? The smart money was in an optimistic mood. The number of bullish hedge fund bets rose by 1 recently. Ciena Corporation (NASDAQ:CIEN) was in 32 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 36. Our calculations also showed that CIEN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with CIEN holdings at the end of March. 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let's view the recent hedge fund action surrounding Ciena Corporation (NASDAQ:CIEN).
How are hedge funds trading Ciena Corporation (NASDAQ:CIEN)?
At second quarter's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in CIEN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ciena Corporation (NASDAQ:CIEN) was held by Polar Capital, which reported holding $99.1 million worth of stock at the end of September. It was followed by D E Shaw with a $72.8 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Ciena Corporation (NASDAQ:CIEN), around 2.82% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, dishing out 2.75 percent of its 13F equity portfolio to CIEN.
Consequently, specific money managers were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, created the biggest position in Ciena Corporation (NASDAQ:CIEN). Point72 Asset Management had $13.4 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $9 million investment in the stock during the quarter. The other funds with brand new CIEN positions are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Kevin McCarthy's Breakline Capital, and Mark Coe's Intrinsic Edge Capital.
Let's check out hedge fund activity in other stocks similar to Ciena Corporation (NASDAQ:CIEN). We will take a look at Chegg Inc (NYSE:CHGG), Mylan Inc. (NASDAQ:MYL), Gold Fields Limited (NYSE:GFI), Caesars Entertainment Corp (NASDAQ:CZR), MGM Resorts International (NYSE:MGM), Carnival Corporation & plc (NYSE:CUK), and Pinnacle West Capital Corporation (NYSE:PNW). This group of stocks' market caps are closest to CIEN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHGG,45,1004897,11 MYL,46,1646058,-3 GFI,15,548446,-7 CZR,50,3911673,3 MGM,32,1006863,-18 CUK,14,72014,5 PNW,25,753260,0 Average,32.4,1277602,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $1278 million. That figure was $370 million in CIEN's case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 14 bullish hedge fund positions. Ciena Corporation (NASDAQ:CIEN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CIEN is 57.7. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately CIEN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CIEN investors were disappointed as the stock returned -21.4% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.