It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds' favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Zions Bancorporation, National Association (NASDAQ:ZION) and compare its performance against hedge funds' favorite stocks.
Zions Bancorporation, National Association (NASDAQ:ZION) investors should be aware of a decrease in hedge fund sentiment in recent months. ZION was in 29 hedge funds' portfolios at the end of the third quarter of 2019. There were 35 hedge funds in our database with ZION positions at the end of the previous quarter. Our calculations also showed that ZION isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_255014" align="aligncenter" width="450"] Clint Carlson of Carlson Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's view the new hedge fund action surrounding Zions Bancorporation, National Association (NASDAQ:ZION).
What have hedge funds been doing with Zions Bancorporation, National Association (NASDAQ:ZION)?
At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ZION over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Balyasny Asset Management held the most valuable stake in Zions Bancorporation, National Association (NASDAQ:ZION), which was worth $71.4 million at the end of the third quarter. On the second spot was Highbridge Capital Management which amassed $60.8 million worth of shares. Carlson Capital, Point72 Asset Management, and Citadel Investment Group 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 Highbridge Capital Management allocated the biggest weight to Zions Bancorporation, National Association (NASDAQ:ZION), around 8.87% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 3.8 percent of its 13F equity portfolio to ZION.
Due to the fact that Zions Bancorporation, National Association (NASDAQ:ZION) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of funds that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Daniel Johnson's Gillson Capital sold off the largest stake of all the hedgies watched by Insider Monkey, totaling about $11.6 million in stock. David Rodriguez-Fraile's fund, BlueMar Capital Management, also dropped its stock, about $5.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Zions Bancorporation, National Association (NASDAQ:ZION) but similarly valued. These stocks are Kilroy Realty Corporation (NYSE:KRC), PTC Inc (NASDAQ:PTC), Athene Holding Ltd. (NYSE:ATH), and A. O. Smith Corporation (NYSE:AOS). All of these stocks' market caps are similar to ZION's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRC,23,218142,7 PTC,29,809421,6 ATH,39,1453694,0 AOS,18,330010,-4 Average,27.25,702817,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $703 million. That figure was $469 million in ZION's case. Athene Holding Ltd. (NYSE:ATH) is the most popular stock in this table. On the other hand A. O. Smith Corporation (NYSE:AOS) is the least popular one with only 18 bullish hedge fund positions. Zions Bancorporation, National Association (NASDAQ:ZION) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ZION wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ZION were disappointed as the stock returned 31% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.