Is Barracuda Networks Inc (CUDA) A Good Stock To Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. 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. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. 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 Barracuda Networks Inc (NYSE:CUDA).

Overall, Barracuda Networks Inc (NYSE:CUDA) has experienced an increase in enthusiasm from smart money lately. There were 16 hedge funds in our database with CUDA holdings at the end of the third quarter, compared to 12 funds at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gray Television, Inc. (NYSE:GTN), Griffon Corporation (NYSE:GFF), and Lakeland Financial Corporation (NASDAQ:LKFN) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

violetkaipa/Shutterstock.com

Keeping this in mind, let’s take a glance at the new action encompassing Barracuda Networks Inc (NYSE:CUDA).

How are hedge funds trading Barracuda Networks Inc (NYSE:CUDA)?

Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, which represents a rise of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CUDA over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the number one position in Barracuda Networks Inc (NYSE:CUDA), worth close to $19.1 million. On Alyeska Investment Group’s heels is Jim Simons of Renaissance Technologies, with a $14 million position. Other professional money managers with similar optimism consist of Cliff Asness’ AQR Capital Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Arrowstreet Capital assembled the biggest position in Barracuda Networks Inc (NYSE:CUDA) and had $3.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $1.8 million position between July and September. The following funds were also among the new CUDA investors: Joel Greenblatt’s Gotham Asset Management, Richard Driehaus’ Driehaus Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks similar to Barracuda Networks Inc (NYSE:CUDA). These stocks are Gray Television, Inc. (NYSE:GTN), Griffon Corporation (NYSE:GFF), Lakeland Financial Corporation (NASDAQ:LKFN), and LHC Group, Inc. (NASDAQ:LHCG). This group of stocks’ market caps are similar to CUDA’s market cap.

As you can see these stocks had an average of 14 funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $56 million in CUDA’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only eight bullish hedge fund positions. Barracuda Networks Inc (NYSE:CUDA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LHC Group, Inc. (NASDAQ:LHCG) might be a better candidate to consider taking a long position in.

Disclosure: None