Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Zimmer Biomet Holdings Inc (NYSE:ZBH) in this article.
Is Zimmer Biomet Holdings Inc (NYSE:ZBH) an attractive investment right now? Prominent investors are buying. The number of bullish hedge fund bets rose by 15 recently. Our calculations also showed that ZBH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are seen as unimportant, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, Our researchers look at the aristocrats of this club, approximately 850 funds. These hedge fund managers direct bulk of the hedge fund industry’s total capital, and by watching their inimitable investments, Insider Monkey has discovered a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action surrounding Zimmer Biomet Holdings Inc (NYSE:ZBH).
How are hedge funds trading Zimmer Biomet Holdings Inc (NYSE:ZBH)?
At the end of the fourth quarter, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in ZBH over the last 18 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, Balyasny Asset Management was the largest shareholder of Zimmer Biomet Holdings Inc (NYSE:ZBH), with a stake worth $113.4 million reported as of the end of September. Trailing Balyasny Asset Management was Millennium Management, which amassed a stake valued at $95.8 million. Holocene Advisors, Bridger Management, and Ariel Investments 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 Tavio Capital allocated the biggest weight to Zimmer Biomet Holdings Inc (NYSE:ZBH), around 16.06% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, setting aside 8.54 percent of its 13F equity portfolio to ZBH.
Now, key hedge funds have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the most valuable position in Zimmer Biomet Holdings Inc (NYSE:ZBH). Polar Capital had $61.7 million invested in the company at the end of the quarter. Kevin Molloy’s Iron Triangle Partners also made a $29.3 million investment in the stock during the quarter. The other funds with brand new ZBH positions are Michael Rockefeller and Karl Kroeker’s Woodline Partners, Samuel Isaly’s OrbiMed Advisors, and Greg Martinez’s Parkman Healthcare Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Zimmer Biomet Holdings Inc (NYSE:ZBH). We will take a look at The Hershey Company (NYSE:HSY), Yum! Brands, Inc. (NYSE:YUM), Paychex, Inc. (NASDAQ:PAYX), and IHS Markit Ltd. (NYSE:INFO). This group of stocks’ market values are similar to ZBH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSY | 39 | 901147 | 3 |
| YUM | 36 | 462690 | -3 |
| PAYX | 36 | 713174 | 4 |
| INFO | 29 | 729273 | -1 |
| Average | 35 | 701571 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $1444 million in ZBH’s case. The Hershey Company (NYSE:HSY) is the most popular stock in this table. On the other hand IHS Markit Ltd. (NYSE:INFO) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Zimmer Biomet Holdings Inc (NYSE:ZBH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th and still beat the market by 3.1 percentage points. Unfortunately ZBH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ZBH were disappointed as the stock returned -25.7% during the first two months of 2020 (through March 11th) 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
