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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Zions Bancorporation, National Association (NASDAQ:ZION).
Is ZION stock a buy? Zions Bancorporation, National Association (NASDAQ:ZION) was in 28 hedge funds' portfolios at the end of December. The all time high for this statistic is 45. ZION shareholders have witnessed an increase in hedge fund interest recently. There were 24 hedge funds in our database with ZION positions at the end of the third quarter. Our calculations also showed that ZION isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Now we're going to review the key hedge fund action surrounding Zions Bancorporation, National Association (NASDAQ:ZION).
Do Hedge Funds Think ZION Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ZION over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Balyasny Asset Management held the most valuable stake in Zions Bancorporation, National Association (NASDAQ:ZION), which was worth $31.7 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $27 million worth of shares. Renaissance Technologies, D E Shaw, and Arrowstreet Capital 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 Elizabeth Park Capital Management allocated the biggest weight to Zions Bancorporation, National Association (NASDAQ:ZION), around 3.36% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to ZION.
There weren't any hedge funds initiating brand new positions in the stock during the fourth quarter.
Let's check out hedge fund activity in other stocks similar to Zions Bancorporation, National Association (NASDAQ:ZION). These stocks are Robert Half International Inc. (NYSE:RHI), National Retail Properties, Inc. (NYSE:NNN), Sealed Air Corporation (NYSE:SEE), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Novavax, Inc. (NASDAQ:NVAX), McAfee Corp. (NASDAQ:MCFE), and Syneos Health, Inc. (NASDAQ:SYNH). All of these stocks' market caps match ZION's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RHI,27,235758,-2 NNN,14,306163,-2 SEE,32,900709,1 KNX,34,429122,-18 NVAX,37,1004250,1 MCFE,20,257825,20 SYNH,29,592871,-11 Average,27.6,532385,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was $170 million in ZION's case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 14 bullish hedge fund positions. Zions Bancorporation, National Association (NASDAQ:ZION) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZION is 58.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on ZION as the stock returned 29.8% since the end of Q4 (through 4/19) 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.