Smart Money is Pouring Into NetApp Inc. (NTAP)

Is NetApp Inc. (NASDAQ:NTAP) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments. More recently the top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters (S&P 500 Index funds returned only 7.6% during the same period).

NetApp Inc. (NASDAQ:NTAP) investors should be aware of an increase in hedge fund interest in recent months. NTAP was in 28 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with NTAP positions at the end of the previous quarter. 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 Jack Henry & Associates, Inc. (NASDAQ:JKHY), Computer Sciences Corporation (NYSE:CSC), and CPFL Energia S.A. (ADR) (NYSE:CPL) 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.

Copyright: andreykuzmin / 123RF Stock Photo

With all of this in mind, let’s take a look at the new action regarding NetApp Inc. (NASDAQ:NTAP).

How are hedge funds trading NetApp Inc. (NASDAQ:NTAP)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 47% surge from the second quarter of 2016, pushing hedge fund ownership to its highest levels in the last year. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Brennan’s Sirios Capital Management has the biggest position in NetApp Inc. (NASDAQ:NTAP), worth close to $93.3 million, corresponding to 5.2% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $72.2 million position. Other hedge funds and institutional investors with similar optimism encompass Jim Simons’sRenaissance Technologies, David Harding’s Winton Capital Management and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Ivory Capital (Investment Mgmt) initiated the biggest position in NetApp Inc. (NASDAQ:NTAP), having $21.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $9.5 million position during the quarter. The following funds were also among the new NTAP investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Tewksbury’s Stevens Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NetApp Inc. (NASDAQ:NTAP) but similarly valued. We will take a look at Jack Henry & Associates, Inc. (NASDAQ:JKHY), Computer Sciences Corporation (NYSE:CSC), CPFL Energia S.A. (ADR) (NYSE:CPL), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX). This group of stocks’ market caps resemble NTAP’s market cap.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.20 billion. That figure was $388 million in NTAP’s case. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the most popular stock in this table. On the other hand CPFL Energia S.A. (ADR) (NYSE:CPL) is the least popular one with only 5 bullish hedge fund positions. NetApp Inc. (NASDAQ:NTAP) is not the most popular stock in this group but hedge fund interest is still above average and growing. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard VRX might be a better candidate to consider a long position in.

Disclosure: None