U.S. Markets closed

Were Hedge Funds Right About Flocking Into Zayo Group Holdings Inc (ZAYO) ?

Reymerlyn Martin

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.

Zayo Group Holdings Inc (NYSE:ZAYO) investors should be aware of an increase in activity from the world's largest hedge funds of late. Our calculations also showed that ZAYO isn't among the 30 most popular stocks among hedge funds.

Today there are plenty of indicators shareholders have at their disposal to evaluate their holdings. A duo of the most under-the-radar indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the S&P 500 by a very impressive amount (see the details here).

Paul Singer ELLIOTT MANAGEMENT

We're going to go over the new hedge fund action encompassing Zayo Group Holdings Inc (NYSE:ZAYO).

Hedge fund activity in Zayo Group Holdings Inc (NYSE:ZAYO)

At Q4's end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ZAYO over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ZAYO_apr2019

The largest stake in Zayo Group Holdings Inc (NYSE:ZAYO) was held by Senator Investment Group, which reported holding $205.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $162.9 million position. Other investors bullish on the company included Kensico Capital, Zimmer Partners, and Hunt Lane Capital.

As aggregate interest increased, some big names were leading the bulls' herd. Rubric Capital Management, managed by David Rosen, assembled the biggest position in Zayo Group Holdings Inc (NYSE:ZAYO). Rubric Capital Management had $39.1 million invested in the company at the end of the quarter. Mike Masters's Masters Capital Management also initiated a $22.8 million position during the quarter. The following funds were also among the new ZAYO investors: Paul Singer's Elliott Management, Joshua Nash's Ulysses Management, and Oscar Hattink's BlueDrive Global Investors.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Zayo Group Holdings Inc (NYSE:ZAYO) but similarly valued. These stocks are RenaissanceRe Holdings Ltd. (NYSE:RNR), Fortune Brands Home & Security Inc (NYSE:FBHS), CubeSmart (NYSE:CUBE), and Carlyle Group LP (NASDAQ:CG). All of these stocks' market caps are similar to ZAYO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNR,22,489483,2 FBHS,31,418666,-2 CUBE,22,440463,2 CG,10,112818,0 Average,21.25,365358,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $1248 million in ZAYO's case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand Carlyle Group LP (NASDAQ:CG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Zayo Group Holdings Inc (NYSE:ZAYO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on ZAYO as the stock returned 29.1% and outperformed the market as well.

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

Related Content