Is Radware Ltd. (NASDAQ:RDWR) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Radware Ltd. (NASDAQ:RDWR) a good stock to buy now? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets went down by 1 recently. Our calculations also showed that rdwr isn't among the 30 most popular stocks among hedge funds. RDWR was in 17 hedge funds' portfolios at the end of March. There were 18 hedge funds in our database with RDWR positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a glance at the latest hedge fund action regarding Radware Ltd. (NASDAQ:RDWR).
What have hedge funds been doing with Radware Ltd. (NASDAQ:RDWR)?
Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RDWR over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Richard Mashaal's Rima Senvest Management has the largest position in Radware Ltd. (NASDAQ:RDWR), worth close to $151 million, corresponding to 11.3% of its total 13F portfolio. The second most bullish fund manager is Cadian Capital, led by Eric Bannasch, holding a $111.6 million position; 4.4% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish include Jim Simons's Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and John Overdeck and David Siegel's Two Sigma Advisors.
Seeing as Radware Ltd. (NASDAQ:RDWR) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of hedgies that elected to cut their positions entirely heading into Q3. Intriguingly, Josh Goldberg's G2 Investment Partners Management said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $3.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $3.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Radware Ltd. (NASDAQ:RDWR) but similarly valued. We will take a look at TiVo Corporation (NASDAQ:TIVO), PBF Logistics LP (NYSE:PBFX), Clarivate Analytics Plc (NYSE:CCC), and Materion Corp (NYSE:MTRN). This group of stocks' market valuations are similar to RDWR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TIVO,19,112652,0 PBFX,2,1814,2 CCC,22,527191,-2 MTRN,17,90597,0 Average,15,183064,0 [/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 $183 million. That figure was $344 million in RDWR's case. Clarivate Analytics Plc (NYSE:CCC) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 2 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 -4.6% during the same 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.
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