The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Finisar Corporation (NASDAQ:FNSR), and what that likely means for the prospects of the company and its stock.
Is Finisar Corporation (NASDAQ:FNSR) undervalued? Prominent investors are getting more bullish. The number of bullish hedge fund positions improved by 1 in recent months. Our calculations also showed that FNSR isn't among the 30 most popular stocks among hedge funds. FNSR was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with FNSR positions at the end of the previous quarter.
In the financial world there are a lot of gauges market participants have at their disposal to grade publicly traded companies. Two of the less utilized gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outclass the market by a solid margin (see the details here).
Let's review the key hedge fund action surrounding Finisar Corporation (NASDAQ:FNSR).
How are hedge funds trading Finisar Corporation (NASDAQ:FNSR)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FNSR over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alpine Associates held the most valuable stake in Finisar Corporation (NASDAQ:FNSR), which was worth $128.7 million at the end of the first quarter. On the second spot was Magnetar Capital which amassed $123.1 million worth of shares. Moreover, Fisher Asset Management, Renaissance Technologies, and Royce & Associates were also bullish on Finisar Corporation (NASDAQ:FNSR), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the biggest position in Finisar Corporation (NASDAQ:FNSR). Millennium Management had $11.1 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow's Blue Mountain Capital also initiated a $10.3 million position during the quarter. The other funds with new positions in the stock are Nancy Havens-Hasty's Havens Advisors, Andre F. Perold's HighVista Strategies, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Finisar Corporation (NASDAQ:FNSR) but similarly valued. These stocks are Cathay General Bancorp (NASDAQ:CATY), Antero Resources Corp (NYSE:AR), BRP Inc. (NASDAQ:DOOO), and Coca-Cola Consolidated, Inc. (NASDAQ:COKE). All of these stocks' market caps resemble FNSR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CATY,14,39293,0 AR,27,924872,5 DOOO,10,112063,-1 COKE,9,8866,2 Average,15,271274,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $406 million in FNSR's case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand Coca-Cola Consolidated, Inc. (NASDAQ:COKE) is the least popular one with only 9 bullish hedge fund positions. Finisar Corporation (NASDAQ:FNSR) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately FNSR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FNSR investors were disappointed as the stock returned -2.8% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.