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In this article we will take a look at whether hedge funds think Zealand Pharma A/S (NASDAQ:ZEAL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Zealand Pharma A/S (NASDAQ:ZEAL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ZEAL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Air Transport Services Group Inc. (NASDAQ:ATSG), Addus Homecare Corporation (NASDAQ:ADUS), and Virtusa Corporation (NASDAQ:VRTU) to gather more data points.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website.With all of this in mind let's view the key hedge fund action surrounding Zealand Pharma A/S (NASDAQ:ZEAL).
What have hedge funds been doing with Zealand Pharma A/S (NASDAQ:ZEAL)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZEAL over the last 21 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Farallon Capital has the biggest position in Zealand Pharma A/S (NASDAQ:ZEAL), worth close to $19.2 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, with a $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Farallon Capital allocated the biggest weight to Zealand Pharma A/S (NASDAQ:ZEAL), around 0.14% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.0041 percent of its 13F equity portfolio to ZEAL.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks similar to Zealand Pharma A/S (NASDAQ:ZEAL). We will take a look at Air Transport Services Group Inc. (NASDAQ:ATSG), Addus Homecare Corporation (NASDAQ:ADUS), Virtusa Corporation (NASDAQ:VRTU), Kronos Worldwide, Inc. (NYSE:KRO), Vector Group Ltd (NYSE:VGR), Otter Tail Corporation (NASDAQ:OTTR), and Cortexyme, Inc. (NASDAQ:CRTX). This group of stocks' market valuations match ZEAL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATSG,20,112549,-1 ADUS,17,90806,-2 VRTU,28,155153,15 KRO,10,35133,0 VGR,17,131684,-1 OTTR,10,58248,-2 CRTX,7,21069,1 Average,15.6,86377,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $20 million in ZEAL's case. Virtusa Corporation (NASDAQ:VRTU) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Zealand Pharma A/S (NASDAQ:ZEAL) is even less popular than CRTX. Our overall hedge fund sentiment score for ZEAL is 23. 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. Hedge funds dodged a bullet by taking a bearish stance towards ZEAL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd but managed to beat the market again by 15.4 percentage points. Unfortunately ZEAL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ZEAL investors were disappointed as the stock returned -5.9% since the end of the third quarter (through 11/23) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.