Hedge Funds Are Betting On Brocade Communications Systems, Inc. (BRCD)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Brocade Communications Systems, Inc. (NASDAQ:BRCD) investors should be aware of an increase in hedge fund sentiment in recent months. 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 Healthcare Realty Trust Inc (NYSE:HR), Cognex Corporation (NASDAQ:CGNX), and ON Semiconductor Corp (NASDAQ:ON) 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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Keeping this in mind, we’re going to take a look at the key action regarding Brocade Communications Systems, Inc. (NASDAQ:BRCD).

What have hedge funds been doing with Brocade Communications Systems, Inc. (NASDAQ:BRCD)?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Brocade Communications Systems, Inc. (NASDAQ:BRCD). AQR Capital Management has a $127 million position in the stock. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $67.6 million position. Some other professional money managers with similar optimism include Anand Parekh’s Alyeska Investment Group, Ken Griffin’s Citadel Investment Group and Chuck Royce’s Royce & Associates.

As one would reasonably expect, specific money managers have been driving this bullishness. Alyeska Investment Group, initiated the largest position in Brocade Communications Systems, Inc. (NASDAQ:BRCD). Alyeska Investment Group had $40 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also initiated an $11 million position during the quarter. The other funds with brand new BRCD positions are Israel Englander’s Millennium Management, OZ Management, and Leon Shaulov’s Maplelane Capital.

Let’s also examine hedge fund activity in other stocks similar to Brocade Communications Systems, Inc. (NASDAQ:BRCD). We will take a look at Healthcare Realty Trust Inc (NYSE:HR), Cognex Corporation (NASDAQ:CGNX), ON Semiconductor Corp (NASDAQ:ON), and Equity Commonwealth (NYSE:EQC). This group of stocks’ market values are similar to BRCD’s market value.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $308 million. That figure was $368 million in BRCD’s case. Equity Commonwealth (NYSE:EQC) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Brocade Communications Systems, Inc. (NASDAQ:BRCD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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