Is A10 Networks Inc (NYSE:ATEN) 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, 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.
A10 Networks Inc (NYSE:ATEN) was in 15 hedge funds’ portfolios at the end of June. ATEN has experienced a decrease in activity from the world’s largest hedge funds recently. There were 18 hedge funds in our database with ATEN positions at the end of the previous quarter. Our calculations also showed that ATEN isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Eric Singer of VIEX Capital
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the key hedge fund action surrounding A10 Networks Inc (NYSE:ATEN).
Hedge fund activity in A10 Networks Inc (NYSE:ATEN)
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in ATEN a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, VIEX Capital Advisors held the most valuable stake in A10 Networks Inc (NYSE:ATEN), which was worth $39 million at the end of the second quarter. On the second spot was Divisar Capital which amassed $16.8 million worth of shares. Moreover, Renaissance Technologies, Royce & Associates, and Lynrock Lake were also bullish on A10 Networks Inc (NYSE:ATEN), allocating a large percentage of their portfolios to this stock.
Seeing as A10 Networks Inc (NYSE:ATEN) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds who were dropping their full holdings by the end of the second quarter. Interestingly, Israel Englander’s Millennium Management cut the largest position of all the hedgies monitored by Insider Monkey, worth about $2 million in stock. Jeffrey Talpins’s fund, Element Capital Management, also cut its stock, about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as A10 Networks Inc (NYSE:ATEN) but similarly valued. These stocks are Ducommun Incorporated (NYSE:DCO), Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), AquaVenture Holdings Limited (NYSE:WAAS), and Catchmark Timber Trust Inc (NYSE:CTT). This group of stocks’ market valuations resemble ATEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCO | 11 | 68597 | 2 |
| SBT | 6 | 15458 | -1 |
| WAAS | 9 | 20008 | -1 |
| CTT | 9 | 51055 | 0 |
| Average | 8.75 | 38780 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $103 million in ATEN’s case. Ducommun Incorporated (NYSE:DCO) is the most popular stock in this table. On the other hand Sterling Bancorp, Inc. (Southfield, MI)(NASDAQ:SBT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks A10 Networks Inc (NYSE:ATEN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ATEN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ATEN were disappointed as the stock returned 1.8% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
