Does F5 Networks, Inc. (FFIV) Represent a Good Addition to Your Portfolio?

Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the funds tracked by us think of F5 Networks, Inc. (NASDAQ:FFIV).

F5 Networks, Inc. (NASDAQ:FFIV) investors should be aware of a slight increase in activity from the world’s largest hedge funds in recent months. The company was included in the equity portfolios of 32 funds from our database at the end of September, up from 31 funds a quarter earlier. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PVH Corp (NYSE:PVH), Marine Harvest ASA (NYSE:MHG), and Affiliated Managers Group, Inc. (NYSE:AMG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a look at the recent action regarding F5 Networks, Inc. (NASDAQ:FFIV).

What have hedge funds been doing with F5 Networks, Inc. (NASDAQ:FFIV)?

At the end of the third quarter, 32 hedge funds tracked by Insider Monkey were bullish on F5 Networks, up by 3% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies holds the number one position in F5 Networks, Inc. (NASDAQ:FFIV). Renaissance Technologies has a $189.2 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Blue Harbour Group, led by Clifton S. Robbins, holding a $120.6 million position; 4.5% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Philippe Laffont’s Coatue Management, Cliff Asness’ AQR Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Consequently, key hedge funds have jumped into F5 Networks, Inc. (NASDAQ:FFIV) headfirst. Carlson Capital, managed by Clint Carlson, initiated the most outsized position in F5 Networks, Inc. (NASDAQ:FFIV). Carlson Capital had $19.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $9.2 million position between July and September. The following funds were also among the new FFIV investors: Peter Muller’s PDT Partners, Bruce Garelick’s Garelick Capital Partners, and Neil Chriss’s Hutchin Hill Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as F5 Networks, Inc. (NASDAQ:FFIV) but similarly valued. These stocks are PVH Corp (NYSE:PVH), Marine Harvest ASA (NYSE:MHG), Affiliated Managers Group, Inc. (NYSE:AMG), and Unum Group (NYSE:UNM). This group of stocks’ market caps resemble FFIV’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $833 million in FFIV’s case. Affiliated Managers Group, Inc. (NYSE:AMG) is the most popular stock in this table with 35 funds holding shares. On the other hand Marine Harvest ASA (NYSE:MHG) is the least popular one with only five bullish hedge fund positions. F5 Networks, Inc. (NASDAQ:FFIV) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Affiliated Managers Group, Inc. (NYSE:AMG) might be a better candidate to consider a long position.