We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Ribbon Communications Inc. (NASDAQ:RBBN) based on that data.
Ribbon Communications Inc. (NASDAQ:RBBN) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that RBBN isn't among the 30 most popular stocks among hedge funds.
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' 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_733253" align="aligncenter" width="473"] Arnaud Ajdler Engine Capital[/caption]
Let's take a look at the recent hedge fund action regarding Ribbon Communications Inc. (NASDAQ:RBBN).
How are hedge funds trading Ribbon Communications Inc. (NASDAQ:RBBN)?
Heading into the second quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RBBN over the last 15 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Ribbon Communications Inc. (NASDAQ:RBBN), which was worth $10.6 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $10.5 million worth of shares. Moreover, D E Shaw, Arrowstreet Capital, and Engine Capital were also bullish on Ribbon Communications Inc. (NASDAQ:RBBN), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Ribbon Communications Inc. (NASDAQ:RBBN) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of hedge funds that elected to cut their entire stakes in the third quarter. It's worth mentioning that Josh Goldberg's G2 Investment Partners Management said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $1.2 million in stock, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors was right behind this move, as the fund dropped about $0.8 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Ribbon Communications Inc. (NASDAQ:RBBN) but similarly valued. We will take a look at Magenta Therapeutics, Inc. (NASDAQ:MGTA), Surgery Partners, Inc. (NASDAQ:SGRY), Himax Technologies, Inc. (NASDAQ:HIMX), and Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX). This group of stocks' market caps match RBBN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGTA,8,85467,0 SGRY,9,41566,0 HIMX,9,22253,0 CRNX,9,234194,2 Average,8.75,95870,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $37 million in RBBN's case. Surgery Partners, Inc. (NASDAQ:SGRY) is the most popular stock in this table. On the other hand Magenta Therapeutics, Inc. (NASDAQ:MGTA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Ribbon Communications Inc. (NASDAQ:RBBN) is more popular among hedge funds. 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 RBBN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RBBN were disappointed as the stock returned -8.9% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.