Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Zendesk Inc (NYSE:ZEN) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Zendesk Inc (NYSE:ZEN) going to take off soon? The best stock pickers were turning bullish. The number of long hedge fund bets rose by 1 recently. Zendesk Inc (NYSE:ZEN) was in 53 hedge funds’ portfolios at the end of September. The all time high for this statistic is 63. Our calculations also showed that ZEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a look at the latest hedge fund action regarding Zendesk Inc (NYSE:ZEN).
Glen Kacher of Light Street Capital
Do Hedge Funds Think ZEN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZEN over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Whale Rock Capital Management was the largest shareholder of Zendesk Inc (NYSE:ZEN), with a stake worth $191.6 million reported as of the end of September. Trailing Whale Rock Capital Management was Cadian Capital, which amassed a stake valued at $165.1 million. Polar Capital, Citadel Investment Group, and Point72 Asset Management 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 Hunt Lane Capital allocated the biggest weight to Zendesk Inc (NYSE:ZEN), around 10.54% of its 13F portfolio. Toronado Partners is also relatively very bullish on the stock, setting aside 8.56 percent of its 13F equity portfolio to ZEN.
As industrywide interest jumped, key hedge funds have jumped into Zendesk Inc (NYSE:ZEN) headfirst. Tremblant Capital, managed by Brett Barakett, initiated the biggest call position in Zendesk Inc (NYSE:ZEN). Tremblant Capital had $94.4 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also made a $61.3 million investment in the stock during the quarter. The other funds with brand new ZEN positions are Gregg Moskowitz’s Interval Partners, Noam Gottesman’s GLG Partners, and Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Zendesk Inc (NYSE:ZEN) but similarly valued. These stocks are News Corp (NASDAQ:NWSA), Loews Corporation (NYSE:L), Solaredge Technologies Inc (NASDAQ:SEDG), Nordson Corporation (NASDAQ:NDSN), W.P. Carey Inc. (NYSE:WPC), Lightspeed Commerce Inc. (NYSE:LSPD), and Masco Corporation (NYSE:MAS). This group of stocks’ market caps are similar to ZEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWSA | 34 | 737689 | -3 |
| L | 27 | 175121 | -1 |
| SEDG | 33 | 594467 | -4 |
| NDSN | 29 | 310857 | -5 |
| WPC | 24 | 142763 | -5 |
| LSPD | 26 | 631903 | -3 |
| MAS | 29 | 528895 | -6 |
| Average | 28.9 | 445956 | -3.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $446 million. That figure was $1558 million in ZEN’s case. News Corp (NASDAQ:NWSA) is the most popular stock in this table. On the other hand W.P. Carey Inc. (NYSE:WPC) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Zendesk Inc (NYSE:ZEN) is more popular among hedge funds. Our overall hedge fund sentiment score for ZEN is 81.2. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, ZEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ZEN were disappointed as the stock returned -15.4% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Zendesk Inc. (NYSE:ZEN)
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Disclosure: None. This article was originally published at Insider Monkey.
