Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Radware Ltd. (NASDAQ:RDWR) a good investment today? Prominent investors are indeed taking a bullish view. The number of long hedge fund investments increased by 2 in recent months. RDWR was in 11 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with RDWR positions at the end of the previous quarter. 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 Atara Biotherapeutics Inc (NASDAQ:ATRA), Cedar Realty Trust Inc (NYSE:CDR), and Materion Corp (NYSE:MTRN) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Now, we’re going to take a look at the latest action encompassing Radware Ltd. (NASDAQ:RDWR).
What have hedge funds been doing with Radware Ltd. (NASDAQ:RDWR)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a growth of 22% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in RDWR at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Richard Mashaal’s Rima Senvest Management has the most valuable position in Radware Ltd. (NASDAQ:RDWR), worth close to $81.1 million, corresponding to 5.8% of its total 13F portfolio. The second most bullish fund manager is Cadian Capital, led by Eric Bannasch, which holds a $58.9 million position; 3.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise John Brennan’s Sirios Capital Management, Renaissance Technologies, one of the largest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key money managers have jumped into Radware Ltd. (NASDAQ:RDWR) headfirst. Highbridge Capital Management, led by Glenn Russell Dubin, established the most outsized position in Radware Ltd. (NASDAQ:RDWR). Highbridge Capital Management had $0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new RDWR position is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Radware Ltd. (NASDAQ:RDWR) but similarly valued. We will take a look at Atara Biotherapeutics Inc (NASDAQ:ATRA), Cedar Realty Trust Inc (NYSE:CDR), Materion Corp (NYSE:MTRN), and Tredegar Corporation (NYSE:TG). This group of stocks’ market values match RDWR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATRA | 7 | 210529 | 0 |
| CDR | 5 | 19220 | -1 |
| MTRN | 10 | 39790 | -4 |
| TG | 7 | 93977 | -2 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $167 million in RDWR’s case. Materion Corp (NYSE:MTRN) is the most popular stock in this table. On the other hand Cedar Realty Trust Inc (NYSE:CDR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Radware Ltd. (NASDAQ:RDWR) 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.
Disclosure: None
