Hedge Funds Never Been This Bullish On Zebra Technologies Corporation (ZBRA)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Zebra Technologies Corporation (NASDAQ:ZBRA) and determine whether hedge funds had an edge regarding this stock.

Zebra Technologies Corporation (NASDAQ:ZBRA) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Zebra Technologies Corporation (NASDAQ:ZBRA) was in 38 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ZBRA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are assumed to be worthless, outdated investment tools of years past. While there are over 8000 funds in operation at the moment, Our researchers hone in on the elite of this group, about 850 funds. It is estimated that this group of investors have their hands on the lion’s share of all hedge funds’ total capital, and by keeping an eye on their matchless stock picks, Insider Monkey has identified several investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s analyze the fresh hedge fund action surrounding Zebra Technologies Corporation (NASDAQ:ZBRA).

Hedge fund activity in Zebra Technologies Corporation (NASDAQ:ZBRA)

At the end of the second quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in ZBRA 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.

More specifically, Cedar Rock Capital was the largest shareholder of Zebra Technologies Corporation (NASDAQ:ZBRA), with a stake worth $334.6 million reported as of the end of September. Trailing Cedar Rock Capital was Ariel Investments, which amassed a stake valued at $81.8 million. Goodnow Investment Group, Adage Capital Management, and Renaissance Technologies 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 Goodnow Investment Group allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 9.43% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, earmarking 8.57 percent of its 13F equity portfolio to ZBRA.

As aggregate interest increased, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, initiated the largest position in Zebra Technologies Corporation (NASDAQ:ZBRA). Alyeska Investment Group had $36.2 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $10.6 million position during the quarter. The other funds with brand new ZBRA positions are Alexander Mitchell’s Scopus Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Zebra Technologies Corporation (NASDAQ:ZBRA). We will take a look at Teva Pharmaceutical Industries Limited (NYSE:TEVA), Nomura Holdings, Inc. (NYSE:NMR), Evergy, Inc. (NYSE:EVRG), Bio-Rad Laboratories, Inc. (NYSE:BIO), Vipshop Holdings Limited (NYSE:VIPS), Altice USA, Inc. (NYSE:ATUS), and M&T Bank Corporation (NYSE:MTB). This group of stocks’ market valuations are similar to ZBRA’s market valuation.

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 $1038 million. That figure was $789 million in ZBRA’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Zebra Technologies Corporation (NASDAQ:ZBRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZBRA is 71.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately ZBRA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ZBRA were disappointed as the stock returned 11.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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