Here is What Hedge Funds Think About ADTRAN, Inc. (ADTN)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in ADTRAN, Inc. (NASDAQ:ADTN).

Is ADTRAN, Inc. (NASDAQ:ADTN) a bargain? Investors who are in the know are categorically actually taking a pessimistic view. The number of long hedge fund bets that are revealed through the 13F filings were cut by 2 lately. There were 13 hedge funds in our database with ADTN holdings at the end of September. 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 1st Source Corporation (NASDAQ:SRCE), Express, Inc. (NYSE:EXPR), and Isle of Capri Casinos (NASDAQ:ISLE) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading ADTRAN, Inc. (NASDAQ:ADTN)?

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, down by 13% from the second quarter of 2016. On the other hand, there were a total of 14 hedge funds with a bullish position in ADTN at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in ADTRAN, Inc. (NASDAQ:ADTN). Renaissance Technologies has a $23.9 million position in the stock. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $11.4 million position. Remaining members of the smart money that hold long positions consist of Anand Parekh’s Alyeska Investment Group, Chuck Royce’s Royce & Associates and D. E. Shaw’s D E Shaw. 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.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cashed in their positions entirely. Intriguingly, John Croghan and Richard Fradin’s Rail-Splitter Capital Management cashed in the largest stake of all the investors studied by Insider Monkey, worth close to $8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $3.5 million worth.

Let’s also examine hedge fund activity in other stocks similar to ADTRAN, Inc. (NASDAQ:ADTN). We will take a look at 1st Source Corporation (NASDAQ:SRCE), Express, Inc. (NYSE:EXPR), Isle of Capri Casinos (NASDAQ:ISLE), and National CineMedia, Inc. (NASDAQ:NCMI). This group of stocks’ market values match ADTN’s market value.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $64 million in ADTN’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand 1st Source Corporation (NASDAQ:SRCE) is the least popular one with only 7 bullish hedge fund positions. ADTRAN, Inc. (NASDAQ:ADTN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EXPR might be a better candidate to consider taking a long position in.

Disclosure: None