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Is ZTO Express (Cayman) Inc. (ZTO) A Good Stock To Buy?

Nina Todic

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. The S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about ZTO Express (Cayman) Inc. (NYSE:ZTO).

Is ZTO Express (Cayman) Inc. (NYSE:ZTO) the right pick for your portfolio? Prominent investors are getting more optimistic. The number of long hedge fund bets went up by 3 in recent months. Our calculations also showed that zto 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kerr Neilson

We're going to go over the fresh hedge fund action regarding ZTO Express (Cayman) Inc. (NYSE:ZTO).

How are hedge funds trading ZTO Express (Cayman) Inc. (NYSE:ZTO)?

At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in ZTO a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ZTO Positions

Among these funds, Platinum Asset Management held the most valuable stake in ZTO Express (Cayman) Inc. (NYSE:ZTO), which was worth $183.6 million at the end of the first quarter. On the second spot was Tairen Capital which amassed $62.9 million worth of shares. Moreover, Segantii Capital, Element Capital Management, and Tiger Global Management were also bullish on ZTO Express (Cayman) Inc. (NYSE:ZTO), allocating a large percentage of their portfolios to this stock.

Now, some big names were leading the bulls' herd. Segantii Capital, managed by Simon Sadler, created the most valuable position in ZTO Express (Cayman) Inc. (NYSE:ZTO). Segantii Capital had $21.6 million invested in the company at the end of the quarter. Jeffrey Talpins's Element Capital Management also initiated a $19.2 million position during the quarter. The following funds were also among the new ZTO investors: Jim Simons's Renaissance Technologies, Alexander Charles McAree's Red Cedar Management, and Matthew Hulsizer's PEAK6 Capital Management.

Let's go over hedge fund activity in other stocks similar to ZTO Express (Cayman) Inc. (NYSE:ZTO). These stocks are Skyworks Solutions Inc (NASDAQ:SWKS), Cardinal Health, Inc. (NYSE:CAH), Fortinet Inc (NASDAQ:FTNT), and New Oriental Education & Technology Group Inc. (NYSE:EDU). This group of stocks' market caps are closest to ZTO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWKS,38,964084,6 CAH,26,849877,-9 FTNT,34,1245315,1 EDU,28,932754,3 Average,31.5,998008,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $998 million. That figure was $335 million in ZTO's case. Skyworks Solutions Inc (NASDAQ:SWKS) is the most popular stock in this table. On the other hand Cardinal Health, Inc. (NYSE:CAH) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks ZTO Express (Cayman) Inc. (NYSE:ZTO) is even less popular than CAH. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ZTO, though not to the same extent, as the stock returned 3.8% during the same time frame and outperformed the market as well.

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

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