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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards F5 Networks, Inc. (NASDAQ:FFIV) changed recently.
Is F5 Networks, Inc. (NASDAQ:FFIV) undervalued? Money managers were getting more bullish. The number of bullish hedge fund positions rose by 4 recently. F5 Networks, Inc. (NASDAQ:FFIV) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that FFIV isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 26 hedge funds in our database with FFIV positions at the end of the first quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 we're going to view the key hedge fund action surrounding F5 Networks, Inc. (NASDAQ:FFIV).
Do Hedge Funds Think FFIV Is A Good Stock To Buy Now?
At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the first quarter of 2020. On the other hand, there were a total of 39 hedge funds with a bullish position in FFIV a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in F5 Networks, Inc. (NASDAQ:FFIV), worth close to $354.6 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $108 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions contain Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to F5 Networks, Inc. (NASDAQ:FFIV), around 1.14% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.96 percent of its 13F equity portfolio to FFIV.
As aggregate interest increased, key money managers have jumped into F5 Networks, Inc. (NASDAQ:FFIV) headfirst. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, assembled the biggest position in F5 Networks, Inc. (NASDAQ:FFIV). Woodline Partners had $19.7 million invested in the company at the end of the quarter. Mikal Patel's Oribel Capital Management also initiated a $9.6 million position during the quarter. The following funds were also among the new FFIV investors: Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Ray Dalio's Bridgewater Associates, and David Costen Haley's HBK Investments.
Let's now review hedge fund activity in other stocks similar to F5 Networks, Inc. (NASDAQ:FFIV). These stocks are Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Santander Consumer USA Holdings Inc (NYSE:SC), Levi Strauss & Co. (NYSE:LEVI), Floor & Decor Holdings, Inc. (NYSE:FND), Watsco Inc (NYSE:WSO), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Bunge Limited (NYSE:BG). All of these stocks' market caps are closest to FFIV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KOF,9,461993,-1 SC,26,325714,3 LEVI,30,414270,11 FND,28,1164208,-10 WSO,26,306144,4 SPCE,18,181423,1 BG,40,399239,-4 Average,25.3,464713,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $705 million in FFIV's case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. F5 Networks, Inc. (NASDAQ:FFIV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FFIV is 65.9. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on FFIV as the stock returned 9.5% since the end of Q2 (through 10/15) 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.