Infinera Corp. (INFN): Hedge Funds Are Snapping Up

In this article we will analyze whether Infinera Corp. (NASDAQ:INFN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Infinera Corp. (NASDAQ:INFN) has seen an increase in enthusiasm from smart money of late. Infinera Corp. (NASDAQ:INFN) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. There were 20 hedge funds in our database with INFN positions at the end of the first quarter. Our calculations also showed that INFN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Howard Marks of Oaktree Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Infinera Corp. (NASDAQ:INFN).

Do Hedge Funds Think INFN Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in INFN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Oaktree Capital Management, managed by Howard Marks, holds the largest position in Infinera Corp. (NASDAQ:INFN). Oaktree Capital Management has a $256.8 million position in the stock, comprising 3.5% of its 13F portfolio. The second largest stake is held by Greenhouse Funds, managed by Joe Milano, which holds a $58.3 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Chuck Royce’s Royce & Associates, Renaissance Technologies and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Infinera Corp. (NASDAQ:INFN), around 5.1% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 3.47 percent of its 13F equity portfolio to INFN.

As aggregate interest increased, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in Infinera Corp. (NASDAQ:INFN). Point72 Asset Management had $12.2 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Infinera Corp. (NASDAQ:INFN) but similarly valued. We will take a look at Companhia Brasileira de Distrib. (NYSE:CBD), Hims & Hers Health, Inc. (NYSE:HIMS), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), United Natural Foods, Inc. (NASDAQ:UNFI), Myovant Sciences Ltd. (NYSE:MYOV), and Morphic Holding, Inc. (NASDAQ:MORF). This group of stocks’ market caps are similar to INFN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $428 million in INFN’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Companhia Brasileira de Distrib. (NYSE:CBD) is the least popular one with only 10 bullish hedge fund positions. Infinera Corp. (NASDAQ:INFN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INFN is 56.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately INFN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INFN were disappointed as the stock returned -27% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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