At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Radware Ltd. (NASDAQ:RDWR) ready to rally soon? The smart money is getting more optimistic. The number of bullish hedge fund positions inched up by 2 lately. Our calculations also showed that RDWR isn’t among the 30 most popular stocks among hedge funds. RDWR was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 16 hedge funds in our database with RDWR holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the fresh hedge fund action regarding Radware Ltd. (NASDAQ:RDWR).
How are hedge funds trading Radware Ltd. (NASDAQ:RDWR)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RDWR over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rima Senvest Management held the most valuable stake in Radware Ltd. (NASDAQ:RDWR), which was worth $132.4 million at the end of the fourth quarter. On the second spot was Cadian Capital which amassed $82.9 million worth of shares. Moreover, Renaissance Technologies, Arrowstreet Capital, and Millennium Management were also bullish on Radware Ltd. (NASDAQ:RDWR), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Radware Ltd. (NASDAQ:RDWR). Marshall Wace LLP had $3.2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Minhua Zhang’s Weld Capital Management.
Let’s also examine 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 Pacific Drilling SA (NYSE:PACD), Five Point Holdings, LLC (NYSE:FPH), Insmed Incorporated (NASDAQ:INSM), and Group 1 Automotive, Inc. (NYSE:GPI). This group of stocks’ market values are closest to RDWR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PACD | 6 | 710151 | 6 |
| FPH | 16 | 242436 | 4 |
| INSM | 16 | 196322 | -1 |
| GPI | 9 | 101178 | -12 |
| Average | 11.75 | 312522 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $301 million in RDWR’s case. Five Point Holdings, LLC (NYSE:FPH) is the most popular stock in this table. On the other hand Pacific Drilling SA (NYSE:PACD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Radware Ltd. (NASDAQ:RDWR) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RDWR wasn’t nearly as popular as these 15 stock and hedge funds that were betting on RDWR were disappointed as the stock returned 15.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
