It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Juniper Networks, Inc. (NYSE:JNPR).
Juniper Networks, Inc. (NYSE:JNPR) has seen an increase in activity from the world's largest hedge funds recently. Our calculations also showed that JNPR isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Let's take a glance at the recent hedge fund action encompassing Juniper Networks, Inc. (NYSE:JNPR).
How are hedge funds trading Juniper Networks, Inc. (NYSE:JNPR)?
At Q4's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in JNPR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Juniper Networks, Inc. (NYSE:JNPR), which was worth $137.1 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $98.3 million worth of shares. Moreover, Pzena Investment Management, D E Shaw, and Diamond Hill Capital were also bullish on Juniper Networks, Inc. (NYSE:JNPR), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have jumped into Juniper Networks, Inc. (NYSE:JNPR) headfirst. Pzena Investment Management, managed by Richard S. Pzena, initiated the most outsized position in Juniper Networks, Inc. (NYSE:JNPR). Pzena Investment Management had $70.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $9.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Sander Gerber's Hudson Bay Capital Management, and Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Juniper Networks, Inc. (NYSE:JNPR) but similarly valued. We will take a look at Duke Realty Corporation (NYSE:DRE), Iron Mountain Incorporated (NYSE:IRM), UGI Corp (NYSE:UGI), and Alleghany Corporation (NYSE:Y). This group of stocks' market valuations match JNPR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRE,22,332523,6 IRM,11,48501,-9 UGI,24,487579,5 Y,19,299451,-2 Average,19,292014,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $624 million in JNPR's case. UGI Corp (NYSE:UGI) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Juniper Networks, Inc. (NYSE:JNPR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately JNPR wasn't in this group. Hedge funds that bet on JNPR were disappointed as the stock returned .4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.