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By Matt Doiron

John Lawrie, a Board member at Juniper Networks (JNPR), bought about 16,700 shares of Juniper's stock on November 29th at an average price of $18 per share, according to a filing with the SEC. This more than doubled Lawrie's direct holdings in the company. Studies show that stocks bought by insiders tend to outperform the market, and we think that this is partly because insiders have to be quite confident in the stock in order to buy- otherwise it would be rational for them to diversify their investments away from the company. Juniper is a $9.4 billion market cap networking and communication device company, comparable to (though obviously much smaller than) Cisco Systems (CSCO).

In the third quarter of 2012, Juniper Networks experienced only a small increase in revenue compared to the same period in 2011. Better sales in services were mostly offset by a decline in product revenue. However, this was an improvement over the first half of the year as Juniper's revenue was slightly lower in the first nine months of 2012 versus a year earlier. With costs generally higher, the company has seen a large decrease in net income- $17 million in the third quarter as opposed to $84 million in Q3 2011. The stock is down 21% from a year ago. The financial community seems confident that Juniper's struggles will be short lived. At its current valuation the company's stock is valued at 51 times trailing earnings (so investors expect the company to rebound) but only 16 times analyst consensus for next year (as the sell-side forecasts better performance as well).

Billionaire Ken Griffin's Citadel Investment Group more than doubled the size of its position in Juniper during the third quarter of the year, and reported owning 5.4 million shares at the end of September (find more of Griffin's stock picks). D.E. Shaw, a large hedge fund managed by billionaire David Shaw, cut its stake but still owned 1.8 million shares (check out D.E. Shaw's new picks). As a general rule, however, Juniper Networks wasn't particularly popular in the hedge fund community as only one other fund- Diamond Hill Capital- reported a stock position worth over $15 million.

In contrast, Cisco was one of the ten most popular tech stocks among hedge funds for the third quarter of 2012, with 59 hedge funds and other notable investors in our database of 13F filings reporting a position (see the full rankings). Cisco hasn't been as impacted by recent industry developments as Juniper, with a trailing P/E of only 12. With it too expected to improve in 2013, the stock trades at 9 times forward earnings estimates. Its earnings were actually higher in its most recent fiscal quarter (which ended in October) than in the same period last year, so its business has been performing relatively well recently. In addition, Cisco has a well-deserved reputation as a relentless share repurchase and also pays a dividend yield of about 3%. It seems like a better buy to us.

We can also compare Juniper to Alcatel Lucent (ALU), Palo Alto Networks (PANW), and Riverbed Technology (RVBD). Alcatel-Lucent's stock price has dropped 31% in the last year, and in its most recent quarter reported a small decline in revenue. Palo Alto has very low earnings per share numbers compared to its stock price, and so the stock is dependent on very strong earnings growth over the next several years. We think that we'd avoid both of these stocks, particularly in favor of Cisco. Riverbed's multiples look similar to Juniper's: the trailing P/E is high, but the company is expected to improve next year and so it trades at only 15 times consensus 2013 earnings. Riverbed can also boast a 28% growth rate in net income last quarter versus a year earlier, driven by both good revenue growth and higher margins. It might be a good growth play if it can keep performing well for the next couple quarters, but we still think that we'd stick with Cisco for now.

Source: Juniper Director More Than Doubles His Bets