In this article we will take a look at whether hedge funds think Extreme Networks, Inc (NASDAQ:EXTR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Extreme Networks, Inc (NASDAQ:EXTR) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. Our calculations also showed that EXTR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the key hedge fund action surrounding Extreme Networks, Inc (NASDAQ:EXTR).
How are hedge funds trading Extreme Networks, Inc (NASDAQ:EXTR)?
At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EXTR over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Extreme Networks, Inc (NASDAQ:EXTR) was held by Renaissance Technologies, which reported holding $11 million worth of stock at the end of September. It was followed by D E Shaw with a $10.3 million position. Other investors bullish on the company included Millennium Management, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position VIEX Capital Advisors allocated the biggest weight to Extreme Networks, Inc (NASDAQ:EXTR), around 2.23% of its 13F portfolio. Cumberland Associates / Springowl Associates is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to EXTR.
Since Extreme Networks, Inc (NASDAQ:EXTR) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds who sold off their full holdings by the end of the first quarter. Interestingly, Mika Toikka’s AlphaCrest Capital Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, totaling about $0.9 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dropped its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Extreme Networks, Inc (NASDAQ:EXTR). We will take a look at Global Indemnity Limited (NASDAQ:GBLI), Seneca Foods Corp (NASDAQ:SENEA), ViewRay, Inc. (NASDAQ:VRAY), and Clean Energy Fuels Corp (NASDAQ:CLNE). This group of stocks’ market values are similar to EXTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GBLI | 4 | 25028 | -2 |
| SENEA | 7 | 25303 | 0 |
| VRAY | 12 | 81516 | -10 |
| CLNE | 8 | 18073 | -2 |
| Average | 7.75 | 37480 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $49 million in EXTR’s case. ViewRay, Inc. (NASDAQ:VRAY) is the most popular stock in this table. On the other hand Global Indemnity Limited (NASDAQ:GBLI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Extreme Networks, Inc (NASDAQ:EXTR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on EXTR as the stock returned 37.9% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
