Is Zions Bancorporation (NASDAQ:ZION) 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.
Zions Bancorporation (NASDAQ:ZION) was in 29 hedge funds' portfolios at the end of the third quarter of 2019. ZION has experienced a decrease in enthusiasm from smart money recently. There were 35 hedge funds in our database with ZION positions at the end of the previous quarter. Our calculations also showed that ZION isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_255014" align="aligncenter" width="600"] Clint Carlson of Carlson Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the recent hedge fund action encompassing Zions Bancorporation (NASDAQ:ZION).
How have hedgies been trading Zions Bancorporation (NASDAQ:ZION)?
At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in ZION over the last 17 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Balyasny Asset Management, managed by Dmitry Balyasny, holds the biggest position in Zions Bancorporation (NASDAQ:ZION). Balyasny Asset Management has a $71.4 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund is Highbridge Capital Management, with a $60.8 million position; 8.9% of its 13F portfolio is allocated to the company. Some other peers that hold long positions contain Clint Carlson's Carlson Capital, Steve Cohen's Point72 Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Highbridge Capital Management allocated the biggest weight to Zions Bancorporation (NASDAQ:ZION), around 8.87% of its portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 3.8 percent of its 13F equity portfolio to ZION.
Judging by the fact that Zions Bancorporation (NASDAQ:ZION) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there exists a select few funds that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Daniel Johnson's Gillson Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $11.6 million in stock. David Rodriguez-Fraile's fund, BlueMar Capital Management, also cut its stock, about $5.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Zions Bancorporation (NASDAQ:ZION). These stocks are Kilroy Realty Corp (NYSE:KRC), PTC Inc (NASDAQ:PTC), Athene Holding Ltd. (NYSE:ATH), and A. O. Smith Corporation (NYSE:AOS). This group of stocks' market caps are similar to ZION's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRC,23,218142,7 PTC,29,809421,6 ATH,39,1453694,0 AOS,18,330010,-4 Average,27.25,702817,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $703 million. That figure was $469 million in ZION's case. Athene Holding Ltd. (NYSE:ATH) is the most popular stock in this table. On the other hand A. O. Smith Corporation (NYSE:AOS) is the least popular one with only 18 bullish hedge fund positions. Zions Bancorporation (NASDAQ:ZION) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ZION as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.