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Hedge Funds Have Never Been This Bullish On Zebra Technologies Corporation (ZBRA)

Asma UL Husna

"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Zebra Technologies Corporation (NASDAQ:ZBRA) and see how it was affected.

Zebra Technologies Corporation (NASDAQ:ZBRA) investors should be aware of an increase in support from the world's most elite money managers of late. ZBRA was in 35 hedge funds' portfolios at the end of March. There were 29 hedge funds in our database with ZBRA holdings at the end of the previous quarter. Our calculations also showed that ZBRA isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Thomas Bancroft - Makaira Partners

We're going to go over the latest hedge fund action surrounding Zebra Technologies Corporation (NASDAQ:ZBRA).

How are hedge funds trading Zebra Technologies Corporation (NASDAQ:ZBRA)?

At Q1's end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in ZBRA a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ZBRA_june2019

More specifically, AQR Capital Management was the largest shareholder of Zebra Technologies Corporation (NASDAQ:ZBRA), with a stake worth $193.8 million reported as of the end of March. Trailing AQR Capital Management was Ariel Investments, which amassed a stake valued at $150 million. Makaira Partners, Columbus Circle Investors, and Goodnow Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Zebra Technologies Corporation (NASDAQ:ZBRA) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Zebra Technologies Corporation (NASDAQ:ZBRA). Marshall Wace LLP had $12.1 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $6.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, D. E. Shaw's D E Shaw, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's now take a look at hedge fund activity in other stocks similar to Zebra Technologies Corporation (NASDAQ:ZBRA). These stocks are Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Kohl's Corporation (NYSE:KSS), Yandex NV (NASDAQ:YNDX), and Alliant Energy Corporation (NASDAQ:LNT). This group of stocks' market caps match ZBRA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IONS,22,236032,1 KSS,27,1188592,0 YNDX,30,843757,7 LNT,17,608429,-11 Average,24,719203,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $719 million. That figure was $1101 million in ZBRA's case. Yandex NV (NASDAQ:YNDX) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NASDAQ:LNT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Zebra Technologies Corporation (NASDAQ:ZBRA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ZBRA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ZBRA were disappointed as the stock returned -19% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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