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Were Hedge Funds Right About Radware Ltd. (RDWR)?

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  • RDWR

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Radware Ltd. (NASDAQ:RDWR) in this article.

Radware Ltd. (NASDAQ:RDWR) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 21. RDWR has seen an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with RDWR holdings at the end of December. Our calculations also showed that RDWR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lee Ainslie's Top 10 Stock Picks
Lee Ainslie's Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we're going to take a glance at the key hedge fund action surrounding Radware Ltd. (NASDAQ:RDWR).

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

At the end of March, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards RDWR over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Radware Ltd. (NASDAQ:RDWR) was held by Rima Senvest Management, which reported holding $81.7 million worth of stock at the end of December. It was followed by Cadian Capital with a $74.6 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Cadian Capital allocated the biggest weight to Radware Ltd. (NASDAQ:RDWR), around 2.76% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 2.57 percent of its 13F equity portfolio to RDWR.

Consequently, key money managers have been driving this bullishness. CaaS Capital, managed by Frank Fu, established the largest position in Radware Ltd. (NASDAQ:RDWR). CaaS Capital had $1.4 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $0.8 million position during the quarter. The other funds with brand new RDWR positions are Benjamin A. Smith's Laurion Capital Management, Michael Gelband's ExodusPoint Capital, and Ken Griffin's Citadel Investment Group.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Radware Ltd. (NASDAQ:RDWR) but similarly valued. These stocks are MYR Group Inc (NASDAQ:MYRG), New Mountain Finance Corp. (NASDAQ:NMFC), Atara Biotherapeutics Inc (NASDAQ:ATRA), The Bancorp, Inc. (NASDAQ:TBBK), iTeos Therapeutics, Inc. (NASDAQ:ITOS), Seabridge Gold, Inc. (NYSE:SA), and Playa Hotels & Resorts N.V. (NASDAQ:PLYA). This group of stocks' market values are closest to RDWR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MYRG,14,51010,3 NMFC,9,18712,-1 ATRA,20,434200,-3 TBBK,18,100912,0 ITOS,12,246149,-3 SA,8,96749,-1 PLYA,26,348138,3 Average,15.3,185124,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $250 million in RDWR's case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (NYSE:SA) is the least popular one with only 8 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. Our overall hedge fund sentiment score for RDWR is 59.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on RDWR, though not to the same extent, as the stock returned 19% since Q1 (through July 23rd) and outperformed the market as well.

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