We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Zions Bancorporation (NASDAQ:ZION) based on that data.
Zions Bancorporation (NASDAQ:ZION) investors should pay attention to an increase in hedge fund interest recently. ZION was in 43 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 30 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 Q4 rankings and see the video at the end of this article for Q3 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' 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 41 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.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a gander at the new hedge fund action surrounding Zions Bancorporation (NASDAQ:ZION).
What does smart money think about Zions Bancorporation (NASDAQ:ZION)?
At the end of the fourth quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ZION over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Zions Bancorporation (NASDAQ:ZION), with a stake worth $101.5 million reported as of the end of September. Trailing Citadel Investment Group was OZ Management, which amassed a stake valued at $97.4 million. Millennium Management, D E Shaw, 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 Elizabeth Park Capital Management allocated the biggest weight to Zions Bancorporation (NASDAQ:ZION), around 3.96% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, designating 3.51 percent of its 13F equity portfolio to ZION.
Now, key hedge funds have been driving this bullishness. D E Shaw, managed by D. E. Shaw, established the largest position in Zions Bancorporation (NASDAQ:ZION). D E Shaw had $12 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $9.1 million investment in the stock during the quarter. The following funds were also among the new ZION investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Daniel Johnson's Gillson Capital, and Noam Gottesman's GLG Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Zions Bancorporation (NASDAQ:ZION) but similarly valued. We will take a look at Ralph Lauren Corporation (NYSE:RL), Bright Horizons Family Solutions Inc (NYSE:BFAM), Kimco Realty Corp (NYSE:KIM), and Store Capital Corporation (NYSE:STOR). This group of stocks' market values are similar to ZION's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RL,37,988865,4 BFAM,34,343904,4 KIM,16,183873,4 STOR,20,957353,0 Average,26.75,618499,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $618 million. That figure was $597 million in ZION's case. Ralph Lauren Corporation (NYSE:RL) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Zions Bancorporation (NASDAQ:ZION) is more popular among hedge funds. 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. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 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 -48.5% during the first two and a half months of 2020 (through March 16th) and underperformed 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 most of these stocks already outperformed the market in Q1. 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.