Abigail Fisher
·6 min read
In this article you are going to find out whether hedge funds think Zillow Group Inc (NASDAQ:Z) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Zillow (Z) stock a buy or sell? The best stock pickers were becoming hopeful. The number of long hedge fund positions moved up by 14 in recent months. Zillow Group Inc (NASDAQ:Z) was in 83 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 69. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that Z isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 69 hedge funds in our database with Z holdings at the end of September.
According to most stock holders, hedge funds are perceived as worthless, old financial vehicles of years past. While there are more than 8000 funds in operation at present, We look at the bigwigs of this club, about 850 funds. These hedge fund managers handle the lion's share of the hedge fund industry's total asset base, and by keeping an eye on their finest investments, Insider Monkey has brought to light a number of investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 11 short targets in our latest quarterly update .
Cathie Wood of ARK Investment Management
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Do Hedge Funds Think Z Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 83 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in Z a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Karthik Sarma's SRS Investment Management has the biggest position in Zillow Group Inc (NASDAQ:Z), worth close to $1.0107 billion, amounting to 16.7% of its total 13F portfolio. The second most bullish fund manager is ARK Investment Management, led by Catherine D. Wood, holding a $841.3 million position; 2.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish encompass Philippe Laffont's Coatue Management, D. E. Shaw's D E Shaw and Nancy Zevenbergen's Zevenbergen Capital Investments. In terms of the portfolio weights assigned to each position Kuvari Partners allocated the biggest weight to Zillow Group Inc (NASDAQ:Z), around 20.25% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, dishing out 16.97 percent of its 13F equity portfolio to Z.
There weren't any hedge funds initiating brand new positions in the stock during the fourth quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Zillow Group Inc (NASDAQ:Z) but similarly valued. These stocks are LyondellBasell Industries NV (NYSE:LYB), Phillips 66 (NYSE:PSX), XPeng Inc. (NYSE:XPEV), Ball Corporation (NYSE:BLL), Schlumberger Limited. (NYSE:SLB), Copart, Inc. (NASDAQ:CPRT), and Datadog, Inc. (NASDAQ:DDOG). All of these stocks' market caps resemble Z's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LYB,27,682905,-4 PSX,26,191517,-1 XPEV,30,820952,4 BLL,44,944165,11 SLB,50,1226025,-3 CPRT,46,1137710,-10 DDOG,52,2899490,10 Average,39.3,1128966,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $1129 million. That figure was $5812 million in Z's case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Phillips 66 (NYSE:PSX) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Zillow Group Inc (NASDAQ:Z) is more popular among hedge funds. Our overall hedge fund sentiment score for Z is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7% in 2021 through March 12th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on Z as the stock returned 16.1% since the end of December (through 3/12) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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