The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards ADTRAN, Inc. (NASDAQ:ADTN).
Is ADTN a good stock to buy now? ADTRAN, Inc. (NASDAQ:ADTN) investors should be aware of a decrease in support from the world's most elite money managers of late. ADTRAN, Inc. (NASDAQ:ADTN) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. There were 17 hedge funds in our database with ADTN holdings at the end of June. Our calculations also showed that ADTN 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.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 we're going to take a peek at the new hedge fund action regarding ADTRAN, Inc. (NASDAQ:ADTN).
Do Hedge Funds Think ADTN Is A Good Stock To Buy Now?
At third quarter's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in ADTN a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of ADTRAN, Inc. (NASDAQ:ADTN), with a stake worth $22.5 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $13.9 million. Royce & Associates, Arrowstreet Capital, and Cinctive Capital Management 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 Harvey Partners allocated the biggest weight to ADTRAN, Inc. (NASDAQ:ADTN), around 2.26% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to ADTN.
Due to the fact that ADTRAN, Inc. (NASDAQ:ADTN) has experienced a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of money managers who were dropping their entire stakes heading into Q4. It's worth mentioning that Anand Parekh's Alyeska Investment Group cut the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $4.7 million in stock, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors was right behind this move, as the fund dumped about $0.3 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to ADTRAN, Inc. (NASDAQ:ADTN). These stocks are Hawkins, Inc. (NASDAQ:HWKN), Invesco Mortgage Capital Inc (NYSE:IVR), Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), GAN Limited (NASDAQ:GAN), DMC Global Inc. (NASDAQ:BOOM), Northfield Bancorp, Inc. (Staten Island, NY) (NASDAQ:NFBK), and US Concrete Inc (NASDAQ:USCR). This group of stocks' market valuations match ADTN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HWKN,11,17961,2 IVR,9,13722,-3 MIRM,9,179296,-4 GAN,7,22574,-4 BOOM,6,8271,-3 NFBK,8,28193,1 USCR,9,25583,0 Average,8.4,42229,-1.6 [/table]
As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $64 million in ADTN's case. Hawkins, Inc. (NASDAQ:HWKN) is the most popular stock in this table. On the other hand DMC Global Inc. (NASDAQ:BOOM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks ADTRAN, Inc. (NASDAQ:ADTN) is more popular among hedge funds. Our overall hedge fund sentiment score for ADTN is 73.9. 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 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 returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on ADTN as the stock returned 48.4% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
