Is ZBRA A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Zebra Technologies Corporation (NASDAQ:ZBRA).

Is ZBRA a good stock to buy now? The best stock pickers were betting on the stock. The number of long hedge fund bets moved up by 6 in recent months. Zebra Technologies Corporation (NASDAQ:ZBRA) was in 44 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. 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 Q3 rankings and see the video for a quick look at the top 5 stocks). There were 38 hedge funds in our database with ZBRA positions at the end of the second quarter.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

John Rogers of Ariel Investments

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the latest hedge fund action regarding Zebra Technologies Corporation (NASDAQ:ZBRA).

Do Hedge Funds Think ZBRA Is A Good Stock To Buy Now?

At Q3’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Zebra Technologies Corporation (NASDAQ:ZBRA) was held by Cedar Rock Capital, which reported holding $326.8 million worth of stock at the end of September. It was followed by Goodnow Investment Group with a $75 million position. Other investors bullish on the company included Ariel Investments, AQR Capital Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 8.48% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, dishing out 7.52 percent of its 13F equity portfolio to ZBRA.

As one would reasonably expect, key hedge funds have jumped into Zebra Technologies Corporation (NASDAQ:ZBRA) headfirst. Sandbar Asset Management, managed by Michael Cowley, initiated the largest position in Zebra Technologies Corporation (NASDAQ:ZBRA). Sandbar Asset Management had $4.7 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also initiated a $0.8 million position during the quarter. The other funds with brand new ZBRA positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Prem Watsa’s Fairfax Financial Holdings, and Peter Muller’s PDT Partners.

Let’s now review hedge fund activity in other stocks similar to Zebra Technologies Corporation (NASDAQ:ZBRA). We will take a look at Kirkland Lake Gold Ltd. (NYSE:KL), Markel Corporation (NYSE:MKL), Pool Corporation (NASDAQ:POOL), Carnival Corporation & Plc (NYSE:CCL), POSCO (NYSE:PKX), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and HubSpot Inc (NYSE:HUBS). This group of stocks’ market values are similar to ZBRA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $619 million. That figure was $818 million in ZBRA’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Zebra Technologies Corporation (NASDAQ:ZBRA) is more popular among hedge funds. Our overall hedge fund sentiment score for ZBRA is 90. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on ZBRA as the stock returned 48.9% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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