In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the telecom equipment companies that are being accumulated and those being distributed by legendary or guru fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for their savvy in picking winning stocks year after year. Taken together, these guru managers are bullish on the telecom equipment group, adding a net $578 million in Q4 to their $4.90 billion prior quarter holdings in the group (for more general information on these guru funds, please look at the end of the article).
The following are the telecom equipment companies that these guru fund managers are most bullish about, and that are also trading at a discount to the peers in their group (see Table):
Juniper Networks Inc. (JNPR): JNPR provides secure network infrastructure products and services that enable ISPs and telecommunications service providers to deploy services and applications and meet the demands resulting from the rapid growth of the Internet. Guru funds together added a net $70 million in Q4 to their $134 million prior quarter position in the company, and taken together guru funds hold 1.7% of the outstanding shares. The top buyer was Columbus, OH-based Diamond Hill Capital Management, with $9.4 billion in assets under management in mutual funds and private investment funds ($47 million), and the top holders were legendary billionaire investor Ken Griffin's Chicago-based hedge fund Citadel ($91 million) and Diamond Hill ($82 million).
JNPR shares soared Tuesday, up about 7% for the day, after it reported that in its Q1, it beat analyst revenue ($1.03 billion v/s $0.98 billion) and earnings estimates (16c v/s 13c). Its shares are almost flat YTD, and trade at 17-18 forward P/E and 1.5 P/B compared to averages of 24.9 and 2.4 for its peers in the computer networking group.
Cisco Systems Inc. (CSCO): CSCO is the worldwide leader in the manufacturing of IP-based networking and other products related to the communications and IT industry. Its products include switches, routers and other networking and communications hardware for corporate, education and government networks around the world. Guru funds together added a net $44 million in Q4 to their $2.50 billion prior quarter position in the company, and taken together guru funds hold 2.4% of the outstanding shares. The top buyer was hedge fund guru Andreas Halvorsen's Viking Global Investors ($145 million), and the top holders were New York-based fund management company Arnhold & S Bleichroeder, with $22.8 billion in 13-F assets ($799 million) and guru Donald and Stephen Yacktman's $12 billion Yacktman Asset Management ($655 million).
CSCO released its FQ2 (January) report over two months ago, beating revenue and earnings estimates; the stock, however, has flat-lined since the report over concerns about its flattish guidance for FQ3. CSCO shares currently trades at 10 forward P/E and 2.2 P/B compared to averages of 24.9 and 2.4 for its peers in the computer networking group. Also, it yields an attractive 1.6% dividend yield, almost non-existent among its peers in the group.
Akamai Technologies Inc. (AKAM): Akamai is a global provider of services that help enterprises and e-businesses improve the delivery of their content and applications over the Internet. Guru funds together added a net $3 million in Q4 to their $51 million prior quarter position in the company, and taken together guru funds hold 0.8% of the outstanding shares. The top buyer was SMidCap-focused mutual fund company Columbia Wanger Asset Management, with $20.5 billion in 13-F assets ($31 million), also the top holder at $31 million.
AKAM released a surprisingly strong Q4 in early February, with earnings (45 cents vs. 40 cents) and revenue ($324 million v/s $311 million) trouncing estimates. The stock is up about 9% since the report, and trades at a reasonable 20-21 forward P/E and 3.1 P/B compared with averages of 34.3 and 3.3 for its peers in the internet services group.
The following are some additional telecom equipment companies that guru fund managers accumulated in Q4 (see Table):
- Alcatel-Lucent ADS (ALU), the French telecommunications giant, that is a leading provider of telecommunications equipment and services to fixed line, wireless and Internet service providers, in which guru funds together added a net $27 million in Q4 to their $2 million prior quarter position;
- Acme Packet Inc. (APKT), that manufactures session border controllers, load balancers, routing proxies and multi-service security gateways, used in session delivery networks that enable delivery of next-generation voice, video and unified communications over IP networks, in which guru funds together added a net $11 million in Q4 to their $23 million prior quarter position; and
- EZchip Semiconductor Ltd. (EZCH), an Israeli fabless semiconductor company that provides Ethernet network processor chips for high-speed networking switches and routers, in which guru funds together added a new $1 million position in Q4.
Besides these, guru fund managers based on their Q4 trading activity indicated that they are bearish on the following telecom equipment companies (see Table):
- Equinix Inc. (EQIX), that provides network-neutral co-location, inter-connection and managed services to enterprises, content providers, financial services companies and network service providers, in which guru funds together cut a net $116 million in Q4 from their $699 million prior quarter position;
- F5 Networks Inc. (FFIV), a leading provider of integrated Internet traffic and content management solutions, in which guru funds together cut a net $81 million in Q4 from their $209 million prior quarter position;
- Brocade Communications Systems Inc. (BRCD), a network solutions provider that helps organizations worldwide transition smoothly to a virtualized world where applications as information can reside anywhere, by providing data center networking and storage area networking solutions., in which guru funds together cut a net $37 million in Q4 from their $45 million prior quarter position;
- Polycom Inc. (PLCM), a developer of communication products that enable unified video, voice and content collaboration for enterprise, government, education and healthcare customers, in which guru funds together cut a net $30 million in Q4 from their $95 billion prior quarter position; and
- Riverbed Technology Inc. (RVBD), a provider of products and services that improve applications and accessibility of data over wide area networks or WANs, in which guru funds together cut a net $1 million in Q4 from their $25 million prior quarter position.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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