Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. 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).
Is Citrix Systems, Inc. (NASDAQ:CTXS) the right pick for your portfolio? Money managers are taking a bearish view. The number of bullish hedge fund bets retreated by 2 in recent months. Our calculations also showed that ctxs isn’t among the 30 most popular stocks among hedge funds. CTXS was in 34 hedge funds’ portfolios at the end of March. There were 36 hedge funds in our database with CTXS positions at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 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 new hedge fund action surrounding Citrix Systems, Inc. (NASDAQ:CTXS).
How have hedgies been trading Citrix Systems, Inc. (NASDAQ:CTXS)?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CTXS over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Elliott Management was the largest shareholder of Citrix Systems, Inc. (NASDAQ:CTXS), with a stake worth $607 million reported as of the end of March. Trailing Elliott Management was D E Shaw, which amassed a stake valued at $251.6 million. GLG Partners, Renaissance Technologies, and Farallon Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Citrix Systems, Inc. (NASDAQ:CTXS) has faced falling interest from the smart money, we can see that there was a specific group of hedgies that elected to cut their full holdings in the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $40.7 million in stock, and Richard Barrera’s Roystone Capital Partners was right behind this move, as the fund said goodbye to about $30.1 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Citrix Systems, Inc. (NASDAQ:CTXS). We will take a look at Marvell Technology Group Ltd. (NASDAQ:MRVL), Expeditors International of Washington, Inc. (NASDAQ:EXPD), Apache Corporation (NYSE:APA), and Arch Capital Group Ltd. (NASDAQ:ACGL). All of these stocks’ market caps resemble CTXS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRVL | 32 | 1469427 | -3 |
| EXPD | 30 | 511934 | 6 |
| APA | 28 | 616390 | -1 |
| ACGL | 12 | 1100250 | -1 |
| Average | 25.5 | 924500 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $925 million. That figure was $2132 million in CTXS’s case. Marvell Technology Group Ltd. (NASDAQ:MRVL) is the most popular stock in this table. On the other hand Arch Capital Group Ltd. (NASDAQ:ACGL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Citrix Systems, Inc. (NASDAQ:CTXS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CTXS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTXS were disappointed as the stock returned -4.9% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
