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Hedge Funds Are Dumping Zebra Technologies Corporation (ZBRA)

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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Zebra Technologies Corporation (NASDAQ:ZBRA).

Is Zebra Technologies Corporation (NASDAQ:ZBRA) the right investment to pursue these days? Money managers were becoming less confident. The number of long hedge fund positions shrunk by 6 lately. Zebra Technologies Corporation (NASDAQ:ZBRA) was in 35 hedge funds' portfolios at the end of March. The all time high for this statistic is 44. Our calculations also showed that ZBRA isn't among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Thomas Bancroft - Makaira Partners
Thomas Bancroft - Makaira Partners

Thomas Bancroft of Makaira Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks 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. Now we're going to view the fresh hedge fund action regarding Zebra Technologies Corporation (NASDAQ:ZBRA).

Do Hedge Funds Think ZBRA Is A Good Stock To Buy Now?

At first quarter's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 23 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Cedar Rock Capital held the most valuable stake in Zebra Technologies Corporation (NASDAQ:ZBRA), which was worth $610.6 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $128.2 million worth of shares. Ariel Investments, Goodnow Investment Group, and Makaira Partners 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 0 allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 13.65% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 11.06 percent of its 13F equity portfolio to ZBRA.

Judging by the fact that Zebra Technologies Corporation (NASDAQ:ZBRA) has experienced a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of hedge funds that slashed their full holdings by the end of the first quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group dropped the largest investment of all the hedgies watched by Insider Monkey, valued at an estimated $22 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund said goodbye to about $2.5 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds by the end of the first quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Zebra Technologies Corporation (NASDAQ:ZBRA) but similarly valued. These stocks are Ryanair Holdings plc (NASDAQ:RYAAY), Banco Santander (Brasil) SA (NYSE:BSBR), Hormel Foods Corporation (NYSE:HRL), DTE Energy Company (NYSE:DTE), Carnival Corporation & plc (NYSE:CCL), AvalonBay Communities Inc (NYSE:AVB), and Copart, Inc. (NASDAQ:CPRT). This group of stocks' market valuations are similar to ZBRA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYAAY,14,568235,-9 BSBR,5,3887,-1 HRL,26,483859,-5 DTE,26,205605,-3 CCL,44,593600,-3 AVB,40,630728,8 CPRT,49,966765,3 Average,29.1,493240,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $493 million. That figure was $1164 million in ZBRA's case. Copart, Inc. (NASDAQ:CPRT) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 5 bullish hedge fund positions. Zebra Technologies Corporation (NASDAQ:ZBRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZBRA is 57. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately ZBRA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ZBRA were disappointed as the stock returned 5.2% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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