Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about ADTRAN, Inc. (NASDAQ:ADTN).
ADTRAN, Inc. (NASDAQ:ADTN) has seen an increase in hedge fund interest in recent months. ADTN was in 15 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with ADTN holdings at the end of the previous quarter. Our calculations also showed that ADTN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at present, Our experts hone in on the aristocrats of this group, about 750 funds. Most estimates calculate that this group of people direct bulk of all hedge funds’ total capital, and by observing their top picks, Insider Monkey has come up with several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the key hedge fund action encompassing ADTRAN, Inc. (NASDAQ:ADTN).
What does smart money think about ADTRAN, Inc. (NASDAQ:ADTN)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADTN over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of ADTRAN, Inc. (NASDAQ:ADTN), with a stake worth $26.3 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $11.9 million. Arrowstreet Capital, AQR Capital Management, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to ADTRAN, Inc. (NASDAQ:ADTN), around 0.32% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to ADTN.
Consequently, key hedge funds have jumped into ADTRAN, Inc. (NASDAQ:ADTN) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most outsized position in ADTRAN, Inc. (NASDAQ:ADTN). PEAK6 Capital Management had $1.1 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.7 million position during the quarter. The other funds with brand new ADTN positions are Minhua Zhang’s Weld Capital Management and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to ADTRAN, Inc. (NASDAQ:ADTN). These stocks are Resources Connection, Inc. (NASDAQ:RECN), IGM Biosciences, Inc. (NASDAQ:IGMS), Gamco Investors Inc. (NYSE:GBL), and Green Brick Partners Inc (NASDAQ:GRBK). This group of stocks’ market valuations are similar to ADTN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RECN | 17 | 54217 | 4 |
| IGMS | 11 | 151862 | 11 |
| GBL | 10 | 11055 | 0 |
| GRBK | 16 | 318379 | 1 |
| Average | 13.5 | 133878 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $65 million in ADTN’s case. Resources Connection, Inc. (NASDAQ:RECN) is the most popular stock in this table. On the other hand Gamco Investors Inc. (NYSE:GBL) is the least popular one with only 10 bullish hedge fund positions. ADTRAN, Inc. (NASDAQ:ADTN) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ADTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ADTN were disappointed as the stock returned -18.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
