You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Zendesk Inc (NYSE:ZEN) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 53 hedge funds’ portfolios at the end of the first quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MGM Growth Properties LLC (NYSE:MGP), Juniper Networks, Inc. (NYSE:JNPR), and Leidos Holdings Inc (NYSE:LDOS) to gather more data points.
According to most investors, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the elite of this club, approximately 750 funds. These hedge fund managers administer bulk of all hedge funds’ total capital, and by shadowing their best stock picks, Insider Monkey has found a number of investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We’re going to review the key hedge fund action surrounding Zendesk Inc (NYSE:ZEN).
How are hedge funds trading Zendesk Inc (NYSE:ZEN)?
At the end of the first quarter, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 39 hedge funds held shares or bullish call options in ZEN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alkeon Capital Management held the most valuable stake in Zendesk Inc (NYSE:ZEN), which was worth $246.4 million at the end of the first quarter. On the second spot was Tiger Global Management which amassed $229.7 million worth of shares. Moreover, Whale Rock Capital Management, Citadel Investment Group, and EMS Capital were also bullish on Zendesk Inc (NYSE:ZEN), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Zendesk Inc (NYSE:ZEN) has witnessed falling interest from the smart money, logic holds that there is a sect of hedgies that elected to cut their full holdings heading into Q3. Interestingly, Eric Bannasch’s Cadian Capital dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth close to $68 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $25.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Zendesk Inc (NYSE:ZEN). These stocks are MGM Growth Properties LLC (NYSE:MGP), Juniper Networks, Inc. (NYSE:JNPR), Leidos Holdings Inc (NYSE:LDOS), and Qiagen NV (NYSE:QGEN). All of these 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 |
|---|---|---|---|
| MGP | 17 | 315394 | 5 |
| JNPR | 24 | 730690 | -5 |
| LDOS | 21 | 326471 | -5 |
| QGEN | 23 | 375552 | 2 |
| Average | 21.25 | 437027 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $437 million. That figure was $2095 million in ZEN’s case. Juniper Networks, Inc. (NYSE:JNPR) is the most popular stock in this table. On the other hand MGM Growth Properties LLC (NYSE:MGP) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Zendesk Inc (NYSE:ZEN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ZEN, though not to the same extent, as the stock returned -0.3% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
