Is NTCT A Good Stock To Buy Now?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in NetScout Systems, Inc. (NASDAQ:NTCT)? The smart money sentiment can provide an answer to this question.

Is NTCT a good stock to buy now? NetScout Systems, Inc. (NASDAQ:NTCT) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 29. NTCT has seen a decrease in support from the world’s most elite money managers recently. There were 16 hedge funds in our database with NTCT holdings at the end of June. Our calculations also showed that NTCT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s check out the fresh hedge fund action regarding NetScout Systems, Inc. (NASDAQ:NTCT).

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

Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the second quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in NTCT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in NetScout Systems, Inc. (NASDAQ:NTCT). Fisher Asset Management has a $43.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Fisher Asset Management’s heels is D E Shaw, managed by D. E. Shaw, which holds a $26.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Cumberland Associates / Springowl Associates allocated the biggest weight to NetScout Systems, Inc. (NASDAQ:NTCT), around 2.11% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to NTCT.

Judging by the fact that NetScout Systems, Inc. (NASDAQ:NTCT) has experienced declining sentiment from the smart money, logic holds that there were a few fund managers who were dropping their entire stakes heading into Q4. At the top of the heap, Israel Englander’s Millennium Management sold off the biggest position of the 750 funds followed by Insider Monkey, valued at an estimated $2.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to NetScout Systems, Inc. (NASDAQ:NTCT). We will take a look at Washington Federal Inc. (NASDAQ:WAFD), AssetMark Financial Holdings, Inc. (NYSE:AMK), Helmerich & Payne, Inc. (NYSE:HP), Spirit Airlines Incorporated (NASDAQ:SAVE), Texas Capital Bancshares Inc (NASDAQ:TCBI), Paramount Group Inc (NYSE:PGRE), and Boise Cascade Co (NYSE:BCC). All of these stocks’ market caps are closest to NTCT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $104 million in NTCT’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 10 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. Our overall hedge fund sentiment score for NTCT is 13.8. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on NTCT as the stock returned 18.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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