“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Zoetis Inc (NYSE:ZTS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Zoetis Inc (NYSE:ZTS) was in 37 hedge funds’ portfolios at the end of the first quarter of 2019. ZTS investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 45 hedge funds in our database with ZTS positions at the end of the previous quarter. Our calculations also showed that zts isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the new hedge fund action regarding Zoetis Inc (NYSE:ZTS).
Hedge fund activity in Zoetis Inc (NYSE:ZTS)
At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZTS over the last 15 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.
The largest stake in Zoetis Inc (NYSE:ZTS) was held by Cantillon Capital Management, which reported holding $380.9 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $334.9 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and D E Shaw.
Seeing as Zoetis Inc (NYSE:ZTS) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of fund managers who sold off their entire stakes heading into Q3. Intriguingly, Ryan Caldwell’s Chiron Investment Management dropped the biggest investment of all the hedgies followed by Insider Monkey, worth close to $22.9 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $12.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 8 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks similar to Zoetis Inc (NYSE:ZTS). We will take a look at The Bank of New York Mellon Corporation (NYSE:BK), Honda Motor Co Ltd (NYSE:HMC), Bank of Montreal (NYSE:BMO), and Infosys Limited (NYSE:INFY). This group of stocks’ market caps match ZTS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BK | 36 | 5272376 | 11 |
| HMC | 9 | 67519 | -4 |
| BMO | 15 | 333732 | 0 |
| INFY | 20 | 1070896 | 3 |
| Average | 20 | 1686131 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $1686 million. That figure was $2349 million in ZTS’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Zoetis Inc (NYSE:ZTS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ZTS, though not to the same extent, as the stock returned 1.8% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
