Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Zillow Group Inc (NASDAQ:Z) a healthy stock for your portfolio? Money managers are getting more bullish. The number of long hedge fund positions inched up by 18 in recent months. Our calculations also showed that Z isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are several indicators stock traders can use to appraise publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action regarding Zillow Group Inc (NASDAQ:Z).
Hedge fund activity in Zillow Group Inc (NASDAQ:Z)
Heading into the third quarter of 2019, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 55% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards Z over the last 16 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, SRS Investment Management was the largest shareholder of Zillow Group Inc (NASDAQ:Z), with a stake worth $276.5 million reported as of the end of March. Trailing SRS Investment Management was Valiant Capital, which amassed a stake valued at $162.4 million. Slate Path Capital, Matrix Capital Management, and Valiant Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Matrix Capital Management, managed by David Goel and Paul Ferri, established the largest position in Zillow Group Inc (NASDAQ:Z). Matrix Capital Management had $113.2 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also initiated a $60.5 million position during the quarter. The following funds were also among the new Z investors: Shashin Shah’s Think Investments, Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, and James Crichton’s Hitchwood Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Zillow Group Inc (NASDAQ:Z). We will take a look at Invesco Ltd. (NYSE:IVZ), Carvana Co. (NYSE:CVNA), Cabot Oil & Gas Corporation (NYSE:COG), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks’ market valuations are closest to Z’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IVZ | 20 | 210595 | -4 |
| CVNA | 45 | 1801168 | 4 |
| COG | 37 | 932105 | 5 |
| BRO | 21 | 759675 | 4 |
| Average | 30.75 | 925886 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $1356 million in Z’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Invesco Ltd. (NYSE:IVZ) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Zillow Group Inc (NASDAQ:Z) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately Z wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on Z were disappointed as the stock returned -35.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
