We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Citrix Systems, Inc. (NASDAQ:CTXS).
Citrix Systems, Inc. (NASDAQ:CTXS) was in 27 hedge funds’ portfolios at the end of September. CTXS has experienced a decrease in enthusiasm from smart money lately. There were 34 hedge funds in our database with CTXS positions at the end of the previous quarter. Our calculations also showed that CTXS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Tannenbaum of Fir Tree
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s view the recent hedge fund action regarding Citrix Systems, Inc. (NASDAQ:CTXS).
How are hedge funds trading Citrix Systems, Inc. (NASDAQ:CTXS)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CTXS over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Citrix Systems, Inc. (NASDAQ:CTXS) was held by Elliott Management, which reported holding $587.9 million worth of stock at the end of September. It was followed by GLG Partners with a $213.3 million position. Other investors bullish on the company included Farallon Capital, SRS Investment Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Fir Tree allocated the biggest weight to Citrix Systems, Inc. (NASDAQ:CTXS), around 5.81% of its portfolio. Elliott Management is also relatively very bullish on the stock, designating 4.9 percent of its 13F equity portfolio to CTXS.
Since Citrix Systems, Inc. (NASDAQ:CTXS) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Renaissance Technologies dumped the biggest stake of the 750 funds watched by Insider Monkey, worth close to $71.4 million in call options. Leon Shaulov’s fund, Maplelane Capital, also said goodbye to its call options, about $68.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 7 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Citrix Systems, Inc. (NASDAQ:CTXS). We will take a look at Host Hotels and Resorts Inc (NYSE:HST), The J.M. Smucker Company (NYSE:SJM), Tenaris S.A. (NYSE:TS), and NetApp Inc. (NASDAQ:NTAP). This group of stocks’ market values are similar to CTXS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HST | 27 | 594453 | -1 |
| SJM | 26 | 453856 | 0 |
| TS | 11 | 412435 | -5 |
| NTAP | 24 | 735652 | -2 |
| Average | 22 | 549099 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $1659 million in CTXS’s case. Host Hotels and Resorts Inc (NYSE:HST) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 11 bullish hedge fund positions. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this group together with HST. 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. Hedge funds were also right about betting on CTXS as the stock returned 16.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
