Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Ribbon Communications Inc. (NASDAQ:RBBN) in this article.
Ribbon Communications Inc. (NASDAQ:RBBN) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that RBBN 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.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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. We’re going to take a peek at the fresh hedge fund action regarding Ribbon Communications Inc. (NASDAQ:RBBN).
How have hedgies been trading Ribbon Communications Inc. (NASDAQ:RBBN)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in RBBN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Ribbon Communications Inc. (NASDAQ:RBBN), with a stake worth $9.9 million reported as of the end of March. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $7.6 million. Nokomis Capital, D E Shaw, and Engine Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Ribbon Communications Inc. (NASDAQ:RBBN) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there exists a select few hedge funds who sold off their full holdings last quarter. Interestingly, Eric Singer’s VIEX Capital Advisors cut the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $2.1 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ribbon Communications Inc. (NASDAQ:RBBN) but similarly valued. We will take a look at Magenta Therapeutics, Inc. (NASDAQ:MGTA), Akebia Therapeutics Inc (NASDAQ:AKBA), Revance Therapeutics Inc (NASDAQ:RVNC), and Ellington Financial Inc. (NYSE:EFC). This group of stocks’ market values are similar to RBBN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGTA | 8 | 72421 | 0 |
| AKBA | 14 | 194634 | -5 |
| RVNC | 10 | 27622 | -2 |
| EFC | 9 | 47666 | -1 |
| Average | 10.25 | 85586 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $36 million in RBBN’s case. Akebia Therapeutics Inc (NASDAQ:AKBA) is the most popular stock in this table. On the other hand Magenta Therapeutics, Inc. (NASDAQ:MGTA) is the least popular one with only 8 bullish hedge fund positions. Ribbon Communications Inc. (NASDAQ:RBBN) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on RBBN as the stock returned 19.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
