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Carillon Tower: “Zendesk (ZEN)’s Shares Also Currently Trade at a Deep Discount”

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  • ZEN

Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Mid Cap Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The Russell Midcap® Growth Index (down 0.76%) marginally outperformed its Russell Midcap® Value Index (down 1.01%) counterpart. Individual sectors across the Russell Midcap Growth were largely mixed, with financials (up 6.83%), real estate (up 4.05%), and information technology (up 2.15%) leading the way. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Carillon Tower Advisers, in its Q3 2021 investor letter, mentioned Zendesk, Inc. (NYSE: ZEN) and discussed its stance on the firm. Zendesk, Inc. is a San Francisco, California-based software as a service company with a $12.2 billion market capitalization. ZEN delivered a -29.38% return since the beginning of the year, while its 12-month returns are down by -18.68%. The stock closed at $12.2 billion per share on November 5, 2021.

Here is what Carillon Tower Advisers has to say about Zendesk, Inc. in its Q3 2021 investor letter:

"Zendesk provides customer support software solutions. After successfully navigating the early stages of the pandemic in 2020, the firm has seen its stock cool off on the threat of increased competition from low-cost alternatives. We do not believe that the competitive dynamics have been altered. In fact, the company’s annual revenue growth rate has accelerated in 2021 from the second half of 2020. The shares also currently trade at a deep discount to other cloud-based software vendors."

Software
Software

Based on our calculations, Zendesk, Inc. (NYSE: ZEN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ZEN was in 52 hedge fund portfolios at the end of the first half of 2021, compared to 45 funds in the previous quarter. Zendesk, Inc. (NYSE: ZEN) delivered a -21.07% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Lithium prices have more than doubled over the past year, so we are checking out this emerging lithium stock. We go through lists like the 10 best growth stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

Disclosure: None. This article is originally published at Insider Monkey.