Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at NetScout Systems, Inc. (NASDAQ:NTCT) from the perspective of those elite funds.
NetScout Systems, Inc. (NASDAQ:NTCT) was in 12 hedge funds’ portfolios at the end of the first quarter of 2019. NTCT investors should pay attention to a decrease in hedge fund sentiment in recent months. There were 14 hedge funds in our database with NTCT holdings at the end of the previous quarter. Our calculations also showed that NTCT isn’t among the 30 most popular stocks among hedge funds.
To most investors, hedge funds are viewed as worthless, old investment vehicles of the past. While there are over 8000 funds trading today, Our researchers hone in on the moguls of this club, around 750 funds. Most estimates calculate that this group of people command bulk of all hedge funds’ total asset base, and by paying attention to their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Let’s view the key hedge fund action encompassing NetScout Systems, Inc. (NASDAQ:NTCT).
Hedge fund activity in NetScout Systems, Inc. (NASDAQ:NTCT)
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in NTCT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NetScout Systems, Inc. (NASDAQ:NTCT) was held by Fisher Asset Management, which reported holding $65.5 million worth of stock at the end of March. It was followed by D E Shaw with a $18.6 million position. Other investors bullish on the company included Arrowstreet Capital, Royce & Associates, and Millennium Management.
Due to the fact that NetScout Systems, Inc. (NASDAQ:NTCT) has experienced falling interest from hedge fund managers, we can see that there were a few fund managers that slashed their full holdings last quarter. At the top of the heap, Minhua Zhang’s Weld Capital Management said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $0.4 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also sold off its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NetScout Systems, Inc. (NASDAQ:NTCT) but similarly valued. These stocks are RH (NYSE:RH), Trustmark Corp (NASDAQ:TRMK), Aerie Pharmaceuticals Inc (NASDAQ:AERI), and DiamondRock Hospitality Company (NYSE:DRH). This group of stocks’ market values are similar to NTCT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RH | 36 | 260836 | 8 |
| TRMK | 11 | 37111 | 1 |
| AERI | 23 | 532150 | 0 |
| DRH | 13 | 206595 | -6 |
| Average | 20.75 | 259173 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $98 million in NTCT’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Trustmark Corp (NASDAQ:TRMK) is the least popular one with only 11 bullish hedge fund positions. NetScout Systems, Inc. (NASDAQ:NTCT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NTCT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTCT investors were disappointed as the stock returned -12.9% during the same time 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
