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Do Hedge Funds Love NetApp Inc. (NTAP)?

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NetApp Inc. (NASDAQ:NTAP).

NetApp Inc. (NASDAQ:NTAP) shareholders have witnessed a decrease in hedge fund sentiment lately. NetApp Inc. (NASDAQ:NTAP) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 34. Our calculations also showed that NTAP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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Michael Burry of Scion 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. Now let's take a look at the fresh hedge fund action encompassing NetApp Inc. (NASDAQ:NTAP).

Do Hedge Funds Think NTAP Is A Good Stock To Buy Now?

At first quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NTAP over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in NetApp Inc. (NASDAQ:NTAP), worth close to $75.9 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $58.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish encompass John W. Rogers's Ariel Investments, Phill Gross and Robert Atchinson's Adage Capital Management and Michael Burry's Scion Asset Management. In terms of the portfolio weights assigned to each position L2 Asset Management allocated the biggest weight to NetApp Inc. (NASDAQ:NTAP), around 2.35% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to NTAP.

Seeing as NetApp Inc. (NASDAQ:NTAP) has witnessed bearish sentiment from the smart money, it's easy to see that there was a specific group of funds that elected to cut their positions entirely in the first quarter. Interestingly, Ken Griffin's Citadel Investment Group said goodbye to the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling close to $158.6 million in stock, and Michael Rockefeller and KarláKroeker's Woodline Partners was right behind this move, as the fund sold off about $24.8 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 8 funds in the first quarter.

Let's now review hedge fund activity in other stocks similar to NetApp Inc. (NASDAQ:NTAP). We will take a look at Monolithic Power Systems, Inc. (NASDAQ:MPWR), RLX Technology Inc. (NYSE:RLX), PTC Inc (NASDAQ:PTC), Huntington Bancshares Incorporated (NASDAQ:HBAN), Clarivate Plc (NYSE:CLVT), HEICO Corporation (NYSE:HEI), and Omnicom Group Inc. (NYSE:OMC). This group of stocks' market caps resemble NTAP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MPWR,32,531499,2 RLX,23,246890,23 PTC,33,1769676,-5 HBAN,27,154261,-2 CLVT,26,4720472,-14 HEI,45,638128,1 OMC,33,470825,-1 Average,31.3,1218822,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1219 million. That figure was $317 million in NTAP's case. HEICO Corporation (NYSE:HEI) is the most popular stock in this table. On the other hand RLX Technology Inc. (NYSE:RLX) is the least popular one with only 23 bullish hedge fund positions. NetApp Inc. (NASDAQ:NTAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NTAP is 26.8. 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 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 by 6.7 percentage points. A small number of hedge funds were also right about betting on NTAP, though not to the same extent, as the stock returned 15.1% since the end of Q1 (through July 9th) and outperformed the market.

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