Palo Alto Networks Inc (NYSE:PANW)’s stock has plunged by more than 12% after the cyber-security firm reported fiscal third-quarter adjusted earnings of $0.42 per share on sales of $345.8 million, meeting profit estimates and beating revenue expectations by $6.32 million. Although sales rose by 47.7% year-over-year, shareholders focused on the company’s GAAP loss of $70.2 million due to $112.7 million in share compensation expenses. Guidance is on the lower end of expectations, with management predicting fiscal fourth quarter revenue of $386 million to $390 million and adjusted EPS of $0.48 to $0.50 versus the consensus of $389.3 million and $0.50, respectively.
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In today’s marketplace there are tons of tools that stock market investors employ to analyze their holdings. A duo of the most innovative tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outperform the broader indices by a significant margin (see the details here).
Now, let’s check out the recent action surrounding Palo Alto Networks Inc (NYSE:PANW).
Is Palo Alto Networks Inc (NYSE:PANW) the right pick for your portfolio? Investors who are in the know are getting less optimistic. The number of long hedge fund positions went down by eight during the first quarter and 42 funds tracked by Insider Monkey reported long positions as of the end of March.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in Palo Alto Networks Inc (NYSE:PANW), worth close to $151.9 million, amounting to 0.3% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $97.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Christopher James’s Partner Fund Management, Ken Griffin’s Citadel Investment Group and Anand Parekh’s Alyeska Investment Group.
Since Palo Alto Networks Inc (NYSE:PANW) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few hedgies that slashed their positions entirely in the fourth quarter and on the next page, we are going to take a look at some of those funds. In addition, at the end of this article we will also compare PANW to other stocks including W.W. Grainger, Inc. (NYSE:GWW), Viacom, Inc. (NASDAQ:VIAB), and Potash Corp./Saskatchewan (USA) (NYSE:POT) to get a better sense of its popularity.
Interestingly, Josh Resnick’s Jericho Capital Asset Management dropped the largest stake of all the hedgies tracked by Insider Monkey, worth close to $61.9 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $35.3 million worth of stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Palo Alto Networks Inc (NYSE:PANW) but similarly valued. We will take a look at W.W. Grainger, Inc. (NYSE:GWW), Viacom, Inc. (NASDAQ:VIAB), Potash Corp./Saskatchewan (USA) (NYSE:POT), and Entergy Corporation (NYSE:ETR). This group of stocks’ market values match PANW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GWW | 21 | 833093 | 1 |
| VIAB | 42 | 1123652 | -6 |
| POT | 23 | 793784 | -3 |
| ETR | 24 | 670433 | 7 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $855 million. That figure was $956 million in PANW’s case. Viacom, Inc. (NASDAQ:VIAB) is the most popular stock in this table. On the other hand W.W. Grainger, Inc. (NYSE:GWW) is the least popular one with only 21 bullish hedge fund positions. Palo Alto Networks Inc (NYSE:PANW) 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 VIAB might be a better candidate to consider a long position.
Disclosure: None
