Hedge Funds Are Now Selling Zillow Group Inc (Z)
The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Zillow Group Inc (NASDAQ:Z).
Zillow Group Inc (NASDAQ:Z) was in 82 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 83. Z has seen a decrease in hedge fund sentiment in recent months. There were 83 hedge funds in our database with Z holdings at the end of December. Our calculations also showed that Z 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. 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.
Philippe Laffont of Coatue Management
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Zillow Group Inc (NASDAQ:Z).
Do Hedge Funds Think Z Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 82 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in Z a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, ARK Investment Management was the largest shareholder of Zillow Group Inc (NASDAQ:Z), with a stake worth $1300.6 million reported as of the end of March. Trailing ARK Investment Management was SRS Investment Management, which amassed a stake valued at $947 million. Coatue Management, D E Shaw, and Zevenbergen Capital Investments 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 Zillow Group Inc (NASDAQ:Z), around 42.74% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 14.91 percent of its 13F equity portfolio to Z.
Due to the fact that Zillow Group Inc (NASDAQ:Z) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of fund managers who sold off their full holdings in the first quarter. Intriguingly, Renaissance Technologies dumped the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $85.2 million in stock. Israel Englander's fund, Millennium Management, also dropped its stock, about $46.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to Zillow Group Inc (NASDAQ:Z). We will take a look at Alexandria Real Estate Equities Inc (NYSE:ARE), FleetCor Technologies, Inc. (NYSE:FLT), Vulcan Materials Company (NYSE:VMC), EPAM Systems Inc (NYSE:EPAM), EXACT Sciences Corporation (NASDAQ:EXAS), Paycom Software Inc (NYSE:PAYC), and Nokia Corporation (NYSE:NOK). This group of stocks' market caps are closest to Z's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARE,27,434248,13 FLT,39,1455035,-5 VMC,48,1317475,4 EPAM,24,424015,-8 EXAS,41,2408537,1 PAYC,46,969848,11 NOK,21,352915,2 Average,35.1,1051725,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $1052 million. That figure was $5733 million in Z's case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Zillow Group Inc (NASDAQ:Z) is more popular among hedge funds. Our overall hedge fund sentiment score for Z is 83.6. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately Z wasn't nearly as popular as these 5 stocks and hedge funds that were betting on Z were disappointed as the stock returned -14.5% since the end of the first quarter (through 6/11) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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