Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Fortinet Inc (NASDAQ:FTNT) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Fortinet Inc (NASDAQ:FTNT) a first-rate investment today? Investors who are in the know were taking an optimistic view. The number of long hedge fund positions rose by 6 recently. Fortinet Inc (NASDAQ:FTNT) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that FTNT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 32 hedge funds in our database with FTNT holdings at the end of June.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to go over the recent hedge fund action regarding Fortinet Inc (NASDAQ:FTNT).
Do Hedge Funds Think FTNT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in FTNT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Fortinet Inc (NASDAQ:FTNT), which was worth $309.5 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $239 million worth of shares. Fundsmith LLP, Citadel Investment Group, and Park West Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Park West Asset Management allocated the biggest weight to Fortinet Inc (NASDAQ:FTNT), around 2.37% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 1.32 percent of its 13F equity portfolio to FTNT.
Now, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the most outsized position in Fortinet Inc (NASDAQ:FTNT). ExodusPoint Capital had $6.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $4.1 million investment in the stock during the quarter. The following funds were also among the new FTNT investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, D. E. Shaw’s D E Shaw, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fortinet Inc (NASDAQ:FTNT) but similarly valued. We will take a look at Agilent Technologies Inc. (NYSE:A), Enterprise Products Partners L.P. (NYSE:EPD), American International Group Inc (NYSE:AIG), Exelon Corporation (NYSE:EXC), TC Energy Corporation (NYSE:TRP), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Roper Technologies Inc. (NYSE:ROP). All of these stocks’ market caps are similar to FTNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| A | 46 | 3135637 | 7 |
| EPD | 25 | 233255 | -3 |
| AIG | 30 | 1904264 | -9 |
| EXC | 36 | 1108781 | 1 |
| TRP | 15 | 84084 | -7 |
| VRTX | 55 | 2713283 | -5 |
| ROP | 45 | 1667275 | 4 |
| Average | 36 | 1549511 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1550 million. That figure was $1139 million in FTNT’s case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 15 bullish hedge fund positions. Fortinet Inc (NASDAQ:FTNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FTNT is 64.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on FTNT as the stock returned 1.8% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow Fortinet Inc. (NASDAQ:FTNT)
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Disclosure: None. This article was originally published at Insider Monkey.
