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Was The Smart Money Right About Zebra Technologies (ZBRA)?

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·5 min read
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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Zebra Technologies Corporation (NASDAQ:ZBRA).

Zebra Technologies Corporation (NASDAQ:ZBRA) investors should pay attention to a decrease in hedge fund sentiment lately. Zebra Technologies Corporation (NASDAQ:ZBRA) was in 41 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings).

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 124 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers’ Top 10 Stock Picks
John Rogers’ Top 10 Stock Picks

John Rogers of Ariel Investments

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. Now let's take a look at the new hedge fund action regarding Zebra Technologies Corporation (NASDAQ:ZBRA).

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

Heading into the first quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cedar Rock Capital held the most valuable stake in Zebra Technologies Corporation (NASDAQ:ZBRA), which was worth $483.7 million at the end of the fourth quarter. On the second spot was Ariel Investments which amassed $65.6 million worth of shares. Goodnow Investment Group, Arrowstreet Capital, and AQR Capital 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 Cedar Rock Capital allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 10.46% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, dishing out 9.54 percent of its 13F equity portfolio to ZBRA.

Seeing as Zebra Technologies Corporation (NASDAQ:ZBRA) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedgies who were dropping their entire stakes last quarter. Interestingly, Steve Cohen's Point72 Asset Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, comprising about $20.8 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund said goodbye to about $19.9 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Zebra Technologies Corporation (NASDAQ:ZBRA) but similarly valued. We will take a look at CGI Inc. (NYSE:GIB), Canon Inc. (NYSE:CAJ), Synchrony Financial (NYSE:SYF), SVB Financial Group (NASDAQ:SIVB), EPAM Systems Inc (NYSE:EPAM), Trip.com Group Limited (NASDAQ:TCOM), and Entergy Corporation (NYSE:ETR). This group of stocks' market values resemble ZBRA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GIB,15,128389,-5 CAJ,7,58073,0 SYF,50,2464559,4 SIVB,31,707703,4 EPAM,32,616823,-1 TCOM,34,1667634,4 ETR,36,829666,9 Average,29.3,924692,2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $925 million. That figure was $911 million in ZBRA's case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 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 69.5. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on ZBRA as the stock returned 26.9% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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