Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Zix Corporation (NASDAQ:ZIXI) worth your attention right now? Investors who are in the know are becoming less hopeful. The number of long hedge fund positions were cut by 1 in recent months. Our calculations also showed that ZIXI isn’t among the 30 most popular stocks among hedge funds. ZIXI was in 13 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with ZIXI positions at the end of the previous quarter.
If you’d ask most market participants, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are over 8,000 funds with their doors open at the moment, Our experts hone in on the aristocrats of this group, approximately 700 funds. It is estimated that this group of investors direct bulk of the smart money’s total capital, and by observing their inimitable investments, Insider Monkey has deciphered many investment strategies that have historically outrun the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by 6 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s review the recent hedge fund action surrounding Zix Corporation (NASDAQ:ZIXI).
What does the smart money think about Zix Corporation (NASDAQ:ZIXI)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in ZIXI heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Zix Corporation (NASDAQ:ZIXI). Renaissance Technologies has a $20.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Archon Capital Management, led by Constantinos J. Christofilis, holding a $8.1 million position; 3.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of D. E. Shaw’s D E Shaw, Noam Gottesman’s GLG Partners and Cliff Asness’s AQR Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified ZIXI as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Zix Corporation (NASDAQ:ZIXI) but similarly valued. We will take a look at BlackRock MuniEnhanced Fund, Inc. (NYSE:MEN), Brightcove Inc (NASDAQ:BCOV), Moneygram International Inc (NASDAQ:MGI), and Ramaco Resources, Inc. (NASDAQ:METC). All of these stocks’ market caps match ZIXI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MEN | 1 | 3069 | 0 |
| BCOV | 14 | 95792 | -4 |
| MGI | 20 | 32960 | 0 |
| METC | 9 | 15692 | 1 |
| Average | 11 | 36878 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $55 million in ZIXI’s case. Moneygram International Inc (NASDAQ:MGI) is the most popular stock in this table. On the other hand BlackRock MuniEnhanced Fund, Inc. (NYSE:MEN) is the least popular one with only 1 bullish hedge fund positions. Zix Corporation (NASDAQ:ZIXI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MGI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
