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Were Hedge Funds Right About Flocking Into Zebra Technologies Corporation (ZBRA) ?

Abigail Fisher

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Zebra Technologies Corporation (NASDAQ:ZBRA) in this article.

Is Zebra Technologies Corporation (NASDAQ:ZBRA) a marvelous stock to buy now? Money managers are taking a bullish view. The number of long hedge fund positions went up by 2 in recent months. Our calculations also showed that ZBRA isn't among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Thomas Bancroft - Makaira Partners

We're going to go over the new hedge fund action encompassing Zebra Technologies Corporation (NASDAQ:ZBRA).

What have hedge funds been doing with Zebra Technologies Corporation (NASDAQ:ZBRA)?

At Q4's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in ZBRA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

ZBRA_apr2019

Of the funds tracked by Insider Monkey, John W. Rogers's Ariel Investments has the largest position in Zebra Technologies Corporation (NASDAQ:ZBRA), worth close to $134.4 million, corresponding to 1.9% of its total 13F portfolio. The second most bullish fund manager is Cliff Asness of AQR Capital Management, with a $129.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Thomas Bancroft's Makaira Partners, Principal Global Investors's Columbus Circle Investors and Edward Goodnow's Goodnow Investment Group.

As industrywide interest jumped, key money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in Zebra Technologies Corporation (NASDAQ:ZBRA). Arrowstreet Capital had $6.9 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury's Stevens Capital Management, Ian Simm's Impax Asset Management, and Minhua Zhang's Weld Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Zebra Technologies Corporation (NASDAQ:ZBRA) but similarly valued. These stocks are Westlake Chemical Corporation (NYSE:WLK), DaVita Inc (NYSE:DVA), Goldcorp Inc. (NYSE:GG), and Vail Resorts, Inc. (NYSE:MTN). All of these stocks' market caps resemble ZBRA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLK,24,312365,5 DVA,39,3001787,-3 GG,24,182700,6 MTN,26,544655,-4 Average,28.25,1010377,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $1010 million. That figure was $751 million in ZBRA's case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand Westlake Chemical Corporation (NYSE:WLK) is the least popular one with only 24 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on ZBRA as the stock returned 32.7% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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