Juniper Networks, Inc. (NYSE:JNPR) reported a solid second quarter earnings beat on Thursday, as it reported $0.41 in earnings per share on revenue of $1.22 billion. The Street was expecting the network company to post EPS of $0.31 on revenue of $1.10 billion for the quarter. Juniper Networks, Inc. (NYSE:JNPR) also provided a strong outlook for the third quarter, estimating non-GAAP EPS of between $0.50 – $0.54 and revenue of $1.23 billion. The Street was expecting non-GAAP EPS of $0.46 on total revenue of $1.16 billion. Overall, the strong earnings report propelled the stock up by just under 4% on Friday, after initially jumping as much as 10% earlier in the day. The stock was also upgraded on Friday to ‘Neutral’ from ‘Sell’ by MKM Partners. The research firm admitted that it was early in believing router growth had capped, and upgraded its projected revenues for Juniper Networks for 2015 and 2016.
Hedge fund movement in the stock was rather uneventful during the first quarter, as a total of 41 of the hedge funds tracked by Insider Monkey held long positions in Juniper Networks, Inc. (NYSE:JNPR) with a total investment of $1.63 billion. 37 hedge funds had $1.64 billion worth of holdings in the stock at the end of 2014. Considering the fact that the stock gained 1% during the January – March period, we can say that the overall investment in the stock by hedge funds dipped slightly during the quarter, despite an increase in the number of hedge funds holding positions in the stock.
Most investors don’t understand hedge funds and indicators that are based on hedge fund and insider activity. They ignore hedge funds because of their recent poor performance in the long-running bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns enjoyed (or not) by investors. We uncovered through extensive research that hedge funds’ long positions in small-cap stocks actually greatly outperformed the market from 1999 to 2012, and built a system around this. The 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012 when this system went live, returning a cumulative 139.7% vs. 58.7% for the S&P 500 Index (read the details).
Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information. Looking at Juniper Networks, Inc. (NYSE:JNPR), there were no insider purchases of the stock during the first half of this year, but there were a few insider sales. Vice Chairman of the Board, Pradeep Sindhu sold around 180,000 shares this year, while Chief Financial and Operations Office at Juniper, Robyn Denholm sold around 50,000 shares, and Chief Accounting Officer, Terrance Spidell sold around 5,000 shares.
Keeping this in mind, let’s analyze the fresh smart money action surrounding Juniper Networks, Inc. (NYSE:JNPR).
How have hedgies been trading Juniper Networks, Inc. (NYSE:JNPR)?
According to Insider Monkey’s hedge fund database, Paul Singer‘s Elliott Management had the largest position in Juniper Networks, Inc. (NYSE:JNPR), having invested 10.9% of its 13F portfolio in the stock. Elliott Management held around 39.2 million shares of the company valued at $886 million by the end of March. By some distance, coming in second place is Michael Lowenstein of Kensico Capital, with around 8.6 million shares valued at $89.4 million; the fund has 1.8% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Clint Carlson‘s Carlson Capital, Malcolm Fairbairn’s Ascend Capital, and Howard Guberman’s Gruss Asset Management.
As one would reasonably expect, some big names were leading the bulls’ herd. Highbridge Capital Management, led by Glenn Russell Dubin, initiated the largest position in Juniper Networks, Inc. (NYSE:JNPR), having purchased around 1.43 million shares of the company during the first trimester. Scott Lawrence Swid’s SLS Management also bought around 487,000 shares of the company. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Andre F. Perold’s HighVista Strategies, and Peter Muller’s PDT Partners.
Hedge funds were right in not pulling a lot of money out of this stock as the company’s stock enjoyed a strong second quarter and the company posted better-than-expected second quarter results along with strong guidance for the third quarter. Hedge fund managers like activist Paul Singer opted to invest a large sum in the company and are being rewarded for sticking with the stock. Because of Singer’s involvement in the stock and its improved performance, we recommend a long position in it.
Disclosure: None
