Did The Smart Get Cisco Systems, Inc. (CSCO) Right?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Cisco Systems, Inc. (NASDAQ:CSCO) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Cisco Systems, Inc. (NASDAQ:CSCO) was in 63 hedge funds’ portfolios at the end of September. The all time high for this statistic is 68. CSCO shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 60 hedge funds in our database with CSCO positions at the end of the second quarter. Our calculations also showed that CSCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to go over the new hedge fund action encompassing Cisco Systems, Inc. (NASDAQ:CSCO).

John Overdeck of Two Sigma AdvisorsJohn Overdeck

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

At Q3’s end, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2021. By comparison, 59 hedge funds held shares or bullish call options in CSCO 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.

More specifically, Fisher Asset Management was the largest shareholder of Cisco Systems, Inc. (NASDAQ:CSCO), with a stake worth $1242.6 million reported as of the end of September. Trailing Fisher Asset Management was Generation Investment Management, which amassed a stake valued at $1041.2 million. AQR Capital Management, Citadel Investment Group, and Adage 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 Breakline Capital allocated the biggest weight to Cisco Systems, Inc. (NASDAQ:CSCO), around 5.74% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 4.33 percent of its 13F equity portfolio to CSCO.

Consequently, key money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the largest call position in Cisco Systems, Inc. (NASDAQ:CSCO). Laurion Capital Management had $139.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $56.1 million position during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cisco Systems, Inc. (NASDAQ:CSCO) but similarly valued. We will take a look at The Coca-Cola Company (NYSE:KO), Thermo Fisher Scientific Inc. (NYSE:TMO), Verizon Communications Inc. (NYSE:VZ), Eli Lilly and Company (NYSE:LLY), Novo Nordisk A/S (NYSE:NVO), Danaher Corporation (NYSE:DHR), and Intel Corporation (NASDAQ:INTC). This group of stocks’ market caps match CSCO’s market cap.

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As you can see these stocks had an average of 63 hedge funds with bullish positions and the average amount invested in these stocks was $9352 million. That figure was $3938 million in CSCO’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 27 bullish hedge fund positions. Cisco Systems, Inc. (NASDAQ:CSCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CSCO is 62.7. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on CSCO as the stock returned 3.6% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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