World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Radware Ltd. (NASDAQ:RDWR) a worthy stock to buy now? The best stock pickers are becoming less confident. The number of bullish hedge fund positions were cut by 1 lately. Our calculations also showed that RDWR isn't among the 30 most popular stocks among hedge funds (see the video below). RDWR was in 16 hedge funds' portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with RDWR positions at the end of the previous quarter. Video: Click the image to 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 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a peek at the fresh hedge fund action regarding Radware Ltd. (NASDAQ:RDWR).
What have hedge funds been doing with Radware Ltd. (NASDAQ:RDWR)?
At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RDWR over the last 16 quarters. 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 Radware Ltd. (NASDAQ:RDWR) was held by Rima Senvest Management, which reported holding $141.5 million worth of stock at the end of March. It was followed by Cadian Capital with a $107.2 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Citadel Investment Group.
Because Radware Ltd. (NASDAQ:RDWR) has experienced a decline in interest from hedge fund managers, logic holds that there lies a certain "tier" of funds that slashed their entire stakes in the second quarter. Intriguingly, Louis Navellier's Navellier & Associates dumped the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at close to $1.4 million in stock. David Costen Haley's fund, HBK Investments, also dropped its stock, about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to Radware Ltd. (NASDAQ:RDWR). These stocks are Triumph Group Inc (NYSE:TGI), Qutoutiao Inc. (NASDAQ:QTT), Guess', Inc. (NYSE:GES), and Perficient, Inc. (NASDAQ:PRFT). This group of stocks' market caps are closest to RDWR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TGI,12,62143,0 QTT,7,32603,2 GES,15,85146,-3 PRFT,16,51120,0 Average,12.5,57753,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $316 million in RDWR's case. Perficient, Inc. (NASDAQ:PRFT) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 7 bullish hedge fund positions. Radware Ltd. (NASDAQ:RDWR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RDWR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RDWR were disappointed as the stock returned -1.9% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
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