Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
NetApp Inc. (NASDAQ:NTAP) was in 26 hedge funds' portfolios at the end of the second quarter of 2019. NTAP investors should pay attention to an increase in hedge fund interest in recent months. There were 24 hedge funds in our database with NTAP positions at the end of the previous quarter. Our calculations also showed that NTAP 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' 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 this former hedge fund manager 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. Let's analyze the recent hedge fund action encompassing NetApp Inc. (NASDAQ:NTAP).
Hedge fund activity in NetApp Inc. (NASDAQ:NTAP)
Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in NTAP a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the largest position in NetApp Inc. (NASDAQ:NTAP). Renaissance Technologies has a $412.7 million position in the stock, comprising 0.4% of its 13F portfolio. On Renaissance Technologies's heels is D E Shaw, led by D. E. Shaw, holding a $119.2 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism comprise John Overdeck and David Siegel's Two Sigma Advisors, Israel Englander's Millennium Management and Noam Gottesman's GLG Partners.
Now, specific money managers have jumped into NetApp Inc. (NASDAQ:NTAP) headfirst. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, established the largest call position in NetApp Inc. (NASDAQ:NTAP). Springbok Capital had $3.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Benjamin A. Smith's Laurion Capital Management, and Lee Ainslie's Maverick Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NetApp Inc. (NASDAQ:NTAP) but similarly valued. We will take a look at Darden Restaurants, Inc. (NYSE:DRI), Dover Corporation (NYSE:DOV), Evergy, Inc. (NYSE:EVRG), and Tableau Software Inc (NYSE:DATA). This group of stocks' market caps are similar to NTAP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRI,24,798896,-14 DOV,32,604250,2 EVRG,25,962365,1 DATA,55,3598512,11 Average,34,1491006,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1491 million. That figure was $907 million in NTAP's case. Tableau Software Inc (NYSE:DATA) is the most popular stock in this table. On the other hand Darden Restaurants, Inc. (NYSE:DRI) is the least popular one with only 24 bullish hedge fund positions. NetApp Inc. (NASDAQ:NTAP) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NTAP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTAP investors were disappointed as the stock returned -14.2% 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.