Is Zoom Video Communications, Inc. (NASDAQ:ZM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Zoom Video Communications, Inc. (NASDAQ:ZM) going to take off soon? The smart money showed its hand via the latest 13F filings and 32 hedge funds disclosed bullish positions on ZM. Our calculations also showed that ZM isn’t among the 30 most popular stocks among hedge funds. What does these numbers mean?
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. We’re going to take a gander at the fresh hedge fund action surrounding Zoom Video Communications, Inc. (NASDAQ:ZM).
What does smart money think about Zoom Video Communications, Inc. (NASDAQ:ZM)?
At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32 from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ZM over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Zoom Video Communications, Inc. (NASDAQ:ZM) was held by Coatue Management, which reported holding $109.7 million worth of stock at the end of March. It was followed by Whale Rock Capital Management with a $108.3 million position. Other investors bullish on the company included Tiger Global Management LLC, SRS Investment Management, and Citadel Investment Group.
Consequently, some big names were breaking ground themselves. Coatue Management, managed by Philippe Laffont, initiated the biggest position in Zoom Video Communications, Inc. (NASDAQ:ZM). Coatue Management had $109.7 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $108.3 million position during the quarter. The other funds with new positions in the stock are Chase Coleman’s Tiger Global Management LLC, Karthik Sarma’s SRS Investment Management, and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Zoom Video Communications, Inc. (NASDAQ:ZM). We will take a look at FirstEnergy Corp. (NYSE:FE), Total System Services, Inc. (NYSE:TSS), Fox Corporation (NASDAQ:FOXA), and Fox Corporation (NASDAQ:FOX). This group of stocks’ market values resemble ZM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FE | 34 | 3498562 | -7 |
| TSS | 45 | 1236790 | 5 |
| FOXA | 60 | 3322026 | -11 |
| FOX | 30 | 1020193 | -10 |
| Average | 42.25 | 2269393 | -5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $2269 million. That figure was $603 million in ZM’s case. Fox Corporation (NASDAQ:FOXA) is the most popular stock in this table. On the other hand Fox Corporation (NASDAQ:FOX) is the least popular one with only 30 bullish hedge fund positions. Zoom Video Communications, Inc. (NASDAQ:ZM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 ZM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ZM investors were disappointed as the stock returned -14.2% 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.