The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Zagg Inc (NASDAQ:ZAGG) based on those filings.
Is Zagg Inc (NASDAQ:ZAGG) a healthy stock for your portfolio? Hedge funds are getting less bullish. The number of bullish hedge fund positions were cut by 1 lately. Our calculations also showed that ZAGG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the new hedge fund action regarding Zagg Inc (NASDAQ:ZAGG).
How have hedgies been trading Zagg Inc (NASDAQ:ZAGG)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in ZAGG a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, AREX Capital Management held the most valuable stake in Zagg Inc (NASDAQ:ZAGG), which was worth $7.1 million at the end of the third quarter. On the second spot was Headlands Capital which amassed $4.5 million worth of shares. Roumell Asset Management, Ariel Investments, and Millennium Management 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 Roumell Asset Management allocated the biggest weight to Zagg Inc (NASDAQ:ZAGG), around 10.15% of its 13F portfolio. AREX Capital Management is also relatively very bullish on the stock, designating 8.3 percent of its 13F equity portfolio to ZAGG.
Due to the fact that Zagg Inc (NASDAQ:ZAGG) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds that slashed their entire stakes last quarter. At the top of the heap, Bradley Louis Radoff’s Fondren Management dumped the biggest position of the 750 funds watched by Insider Monkey, comprising about $0.5 million in stock. Noam Gottesman’s fund, GLG Partners, also sold off its stock, about $0.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Zagg Inc (NASDAQ:ZAGG). We will take a look at Twin Disc, Incorporated (NASDAQ:TWIN), Clipper Realty Inc. (NYSE:CLPR), Landmark Bancorp, Inc. (NASDAQ:LARK), and Gran Tierra Energy Inc. (NYSE:GTE). This group of stocks’ market valuations are closest to ZAGG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWIN | 5 | 17069 | -2 |
| CLPR | 9 | 21816 | 1 |
| LARK | 3 | 3718 | 0 |
| GTE | 12 | 31824 | -3 |
| Average | 7.25 | 18607 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $20 million in ZAGG’s case. Gran Tierra Energy Inc. (NYSE:GTE) is the most popular stock in this table. On the other hand Landmark Bancorp, Inc. (NASDAQ:LARK) is the least popular one with only 3 bullish hedge fund positions. Zagg Inc (NASDAQ:ZAGG) 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. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately ZAGG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ZAGG were disappointed as the stock returned -2.3% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
