Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's analyze whether Zebra Technologies Corporation (NASDAQ:ZBRA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Zebra Technologies Corporation (NASDAQ:ZBRA) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that ZBRA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/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. With all of this in mind let's take a look at the key hedge fund action encompassing Zebra Technologies Corporation (NASDAQ:ZBRA).
How are hedge funds trading Zebra Technologies Corporation (NASDAQ:ZBRA)?
At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 79% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the largest position in Zebra Technologies Corporation (NASDAQ:ZBRA). Ariel Investments has a $116.8 million position in the stock, comprising 1.5% of its 13F portfolio. On Ariel Investments's heels is Goodnow Investment Group, led by Edward Goodnow, holding a $111 million position; 14.9% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of Thomas Bancroft's Makaira Partners, Israel Englander's Millennium Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Makaira Partners allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 19.11% of its 13F portfolio. Goodnow Investment Group is also relatively very bullish on the stock, dishing out 14.86 percent of its 13F equity portfolio to ZBRA.
As industrywide interest jumped, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Zebra Technologies Corporation (NASDAQ:ZBRA). Adage Capital Management had $38.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $30.3 million investment in the stock during the quarter. The other funds with brand new ZBRA positions are Principal Global Investors's Columbus Circle Investors, Jonathan Barrett and Paul Segal's Luminus Management, and Robert Vincent McHugh's Jade Capital Advisors.
Let's check out hedge fund activity in other stocks similar to Zebra Technologies Corporation (NASDAQ:ZBRA). These stocks are Masco Corporation (NYSE:MAS), CenterPoint Energy, Inc. (NYSE:CNP), UDR, Inc. (NYSE:UDR), and Extra Space Storage, Inc. (NYSE:EXR). 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 MAS,45,948362,-6 CNP,30,1326987,-1 UDR,21,360515,-4 EXR,28,206461,-2 Average,31,710581,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $711 million. That figure was $614 million in ZBRA's case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 21 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. 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. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 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 -35% during the same time 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.