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In this article we will take a look at whether hedge funds think Zogenix, Inc. (NASDAQ:ZGNX) 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.
Zogenix, Inc. (NASDAQ:ZGNX) has experienced an increase in enthusiasm from smart money recently. Zogenix, Inc. (NASDAQ:ZGNX) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that ZGNX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to review the fresh hedge fund action regarding Zogenix, Inc. (NASDAQ:ZGNX).
Do Hedge Funds Think ZGNX Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ZGNX over the last 24 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Zogenix, Inc. (NASDAQ:ZGNX) was held by 0, which reported holding $91.3 million worth of stock at the end of June. It was followed by Cadian Capital with a $54.9 million position. Other investors bullish on the company included Marshall Wace LLP, Farallon Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to Zogenix, Inc. (NASDAQ:ZGNX), around 3.3% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, setting aside 2.44 percent of its 13F equity portfolio to ZGNX.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Zogenix, Inc. (NASDAQ:ZGNX) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Zogenix, Inc. (NASDAQ:ZGNX). Marshall Wace LLP had $40.2 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $6.8 million investment in the stock during the quarter. The following funds were also among the new ZGNX investors: Dmitry Balyasny's Balyasny Asset Management, Renaissance Technologies, and Andrew Kurita's Kettle Hill Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Zogenix, Inc. (NASDAQ:ZGNX) but similarly valued. We will take a look at Standard Motor Products, Inc. (NYSE:SMP), Meridian Bioscience, Inc. (NASDAQ:VIVO), Banco Macro SA (NYSE:BMA), Amphastar Pharmaceuticals Inc (NASDAQ:AMPH), Suburban Propane Partners LP (NYSE:SPH), Republic Bancorp, Inc. KY (NASDAQ:RBCAA), and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). This group of stocks' market valuations are closest to ZGNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMP,14,106366,-1 VIVO,13,140278,-3 BMA,6,35375,-2 AMPH,11,12809,2 SPH,3,6821,1 RBCAA,8,16744,3 GLDD,15,108291,-1 Average,10,60955,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $346 million in ZGNX's case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Zogenix, Inc. (NASDAQ:ZGNX) is more popular among hedge funds. Our overall hedge fund sentiment score for ZGNX is 82.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately ZGNX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ZGNX were disappointed as the stock returned -8.7% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.