We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Juniper Networks, Inc. (NYSE:JNPR) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Juniper Networks, Inc. (NYSE:JNPR) a bargain? The smart money is becoming hopeful. The number of long hedge fund bets went up by 5 lately. Our calculations also showed that JNPR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Hondros of AlphaOne Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the recent hedge fund action surrounding Juniper Networks, Inc. (NYSE:JNPR).
How are hedge funds trading Juniper Networks, Inc. (NYSE:JNPR)?
Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the third quarter of 2019. By comparison, 29 hedge funds held shares or bullish call options in JNPR a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the number one position in Juniper Networks, Inc. (NYSE:JNPR). Renaissance Technologies has a $131.5 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is D. E. Shaw of D E Shaw, with a $106.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Cliff Asness’s AQR Capital Management, Richard S. Pzena’s Pzena Investment Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to Juniper Networks, Inc. (NYSE:JNPR), around 2.16% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, designating 0.69 percent of its 13F equity portfolio to JNPR.
Now, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Juniper Networks, Inc. (NYSE:JNPR). Point72 Asset Management had $48.1 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $8.3 million investment in the stock during the quarter. The other funds with brand new JNPR positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Hondros’s AlphaOne Capital Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Juniper Networks, Inc. (NYSE:JNPR) but similarly valued. We will take a look at China Southern Airlines Co Ltd (NYSE:ZNH), AerCap Holdings N.V. (NYSE:AER), Catalent Inc (NYSE:CTLT), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market values resemble JNPR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZNH | 3 | 13907 | 1 |
| AER | 36 | 1423682 | 5 |
| CTLT | 21 | 390050 | -8 |
| VOYA | 43 | 1130069 | 3 |
| Average | 25.75 | 739427 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $735 million in JNPR’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Juniper Networks, Inc. (NYSE:JNPR) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on JNPR, though not to the same extent, as the stock returned -24.2% during the first two and a half months of 2020 (through March 16th) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
