The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded NetApp Inc. (NASDAQ:NTAP) based on those filings.
Is NetApp Inc. (NASDAQ:NTAP) a healthy stock for your portfolio? Investors who are in the know are turning less bullish. The number of long hedge fund positions fell by 1 recently. Our calculations also showed that NTAP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). NTAP was in 26 hedge funds' portfolios at the end of March. There were 27 hedge funds in our database with NTAP holdings at the end of the previous quarter. Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_256989" align="aligncenter" width="399"] Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the fresh hedge fund action surrounding NetApp Inc. (NASDAQ:NTAP).
How are hedge funds trading NetApp Inc. (NASDAQ:NTAP)?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NTAP over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in NetApp Inc. (NASDAQ:NTAP), which was worth $136.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $70 million worth of shares. Two Sigma Advisors, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beech Hill Partners allocated the biggest weight to NetApp Inc. (NASDAQ:NTAP), around 2.01% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 0.33 percent of its 13F equity portfolio to NTAP.
Because NetApp Inc. (NASDAQ:NTAP) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that elected to cut their positions entirely last quarter. Interestingly, Brandon Haley's Holocene Advisors sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $9 million in stock. Thomas Bailard's fund, Bailard Inc, also dumped its stock, about $2.7 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let's go over 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 Ubiquiti Inc. (NYSE:UI), Coupa Software Incorporated (NASDAQ:COUP), The AES Corporation (NYSE:AES), and Teradyne, Inc. (NASDAQ:TER). This group of stocks' market values are similar to NTAP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UI,23,162047,-2 COUP,66,2184206,11 AES,31,445516,4 TER,28,842457,-5 Average,37,908557,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $909 million. That figure was $336 million in NTAP's case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Ubiquiti Inc. (NYSE:UI) is the least popular one with only 23 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately NTAP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NTAP investors were disappointed as the stock returned 8.1% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.