U.S. Markets closed

Most Hedge Funds Sticking With Zumiez Inc. (ZUMZ)

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Zumiez Inc. (NASDAQ:ZUMZ)?

Is Zumiez Inc. (NASDAQ:ZUMZ) undervalued? Prominent investors are becoming less confident. The number of bullish hedge fund bets retreated by 2 in recent months. Our calculations also showed that ZUMZ isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_845793" align="aligncenter" width="397"] Peter Rathjens of Arrowstreet Capital[/caption]

Peter Rathjens Arrowstreet Capital 394

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the key hedge fund action regarding Zumiez Inc. (NASDAQ:ZUMZ).

How have hedgies been trading Zumiez Inc. (NASDAQ:ZUMZ)?

At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ZUMZ 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.

Among these funds, Maverick Capital held the most valuable stake in Zumiez Inc. (NASDAQ:ZUMZ), which was worth $6.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Balyasny Asset Management 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 Venator Capital Management allocated the biggest weight to Zumiez Inc. (NASDAQ:ZUMZ), around 1.24% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.38 percent of its 13F equity portfolio to ZUMZ.

Judging by the fact that Zumiez Inc. (NASDAQ:ZUMZ) has experienced bearish sentiment from hedge fund managers, it's safe to say that there is a sect of hedgies that decided to sell off their full holdings in the first quarter. At the top of the heap, Israel Englander's Millennium Management sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, totaling close to $6 million in stock, and Warren Lammert's Granite Point Capital was right behind this move, as the fund cut about $1.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in the first quarter.

Let's check out hedge fund activity in other stocks similar to Zumiez Inc. (NASDAQ:ZUMZ). We will take a look at CBTX, Inc. (NASDAQ:CBTX), ChampionX Corporation (NYSE:APY), Guess', Inc. (NYSE:GES), and Summit Hotel Properties Inc (NYSE:INN). All of these stocks' market caps resemble ZUMZ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBTX,10,7008,2 APY,19,49368,2 GES,16,31475,-4 INN,12,8543,-3 Average,14.25,24099,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $28 million in ZUMZ's case. ChampionX Corporation (NYSE:APY) is the most popular stock in this table. On the other hand CBTX, Inc. (NASDAQ:CBTX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Zumiez Inc. (NASDAQ:ZUMZ) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on ZUMZ as the stock returned 56.6% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

[company-follow-email id=1318008][/company-follow-email]

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

Related Content