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Is RDWR A Good Stock To Buy?

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Abigail Fisher
·6 min read
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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Radware Ltd. (NASDAQ:RDWR).

Is RDWR a good stock to buy now? Radware Ltd. (NASDAQ:RDWR) shareholders have witnessed a decrease in hedge fund interest lately. Radware Ltd. (NASDAQ:RDWR) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 21. There were 13 hedge funds in our database with RDWR positions at the end of the second quarter. Our calculations also showed that RDWR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as unimportant, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the top tier of this club, around 850 funds. Most estimates calculate that this group of people have their hands on the lion's share of all hedge funds' total capital, and by keeping an eye on their inimitable stock picks, Insider Monkey has unearthed various investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's view the new hedge fund action surrounding Radware Ltd. (NASDAQ:RDWR).

Do Hedge Funds Think RDWR Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the second quarter of 2020. On the other hand, there were a total of 16 hedge funds with a bullish position in RDWR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Cadian Capital, managed by Eric Bannasch, holds the biggest position in Radware Ltd. (NASDAQ:RDWR). Cadian Capital has a $106.2 million position in the stock, comprising 3.5% of its 13F portfolio. On Cadian Capital's heels is Richard Mashaal of Rima Senvest Management, with a $74.5 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Rima Senvest Management allocated the biggest weight to Radware Ltd. (NASDAQ:RDWR), around 4.23% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, dishing out 3.46 percent of its 13F equity portfolio to RDWR.

Because Radware Ltd. (NASDAQ:RDWR) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds who were dropping their full holdings heading into Q4. At the top of the heap, Mark Coe's Intrinsic Edge Capital said goodbye to the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $2.1 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also cut its stock, about $0.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let's check out 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 Plains GP Holdings LP (NYSE:PAGP), Domo Inc. (NASDAQ:DOMO), Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), U.S. Physical Therapy, Inc. (NYSE:USPH), Tennant Company (NYSE:TNC), Stoke Therapeutics, Inc. (NASDAQ:STOK), and Arcus Biosciences, Inc. (NYSE:RCUS). This group of stocks' market valuations match RDWR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAGP,18,74928,-1 DOMO,24,252079,3 ARQT,9,526942,-1 USPH,10,38330,1 TNC,15,77755,5 STOK,9,170786,-2 RCUS,26,221219,-2 Average,15.9,194577,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $256 million in RDWR's case. Arcus Biosciences, Inc. (NYSE:RCUS) is the most popular stock in this table. On the other hand Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is the least popular one with only 9 bullish hedge fund positions. Radware Ltd. (NASDAQ:RDWR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RDWR is 19.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately RDWR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RDWR investors were disappointed as the stock returned 5.6% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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