In this article you are going to find out whether hedge funds think Zix Corporation (NASDAQ:ZIXI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Zix Corporation (NASDAQ:ZIXI) a good stock to buy now? The smart money was cutting their exposure. The number of long hedge fund positions dropped by 9 in recent months. Zix Corporation (NASDAQ:ZIXI) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 21. Our calculations also showed that ZIXI 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).
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s take a gander at the latest hedge fund action encompassing Zix Corporation (NASDAQ:ZIXI).
How have hedgies been trading Zix Corporation (NASDAQ:ZIXI)?
At third quarter’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -56% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZIXI over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the most valuable position in Zix Corporation (NASDAQ:ZIXI). Renaissance Technologies has a $8.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Mark Coe’s Intrinsic Edge Capital, Paul Reeder and Edward Shapiro’s PAR Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Zix Corporation (NASDAQ:ZIXI), around 0.09% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to ZIXI.
Because Zix Corporation (NASDAQ:ZIXI) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few funds that slashed their full holdings heading into Q4. Interestingly, Matthew Drapkin and Steven R. Becker’s Becker Drapkin Management dumped the biggest stake of all the hedgies watched by Insider Monkey, worth about $6.4 million in stock, and George McCabe’s Portolan Capital Management was right behind this move, as the fund dropped about $4.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 9 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Zix Corporation (NASDAQ:ZIXI). We will take a look at New Senior Investment Group Inc (NYSE:SNR), Tiziana Life Sciences plc (NASDAQ:TLSA), Pivotal Investment Corporation II (NYSE:PIC), Legacy Housing Corporation (NASDAQ:LEGH), Gladstone Land Corporation (NASDAQ:LAND), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), and Blue Bird Corporation (NASDAQ:BLBD). All of these stocks’ market caps are similar to ZIXI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNR | 13 | 50201 | 1 |
| TLSA | 4 | 1035 | 3 |
| PIC | 13 | 68804 | 1 |
| LEGH | 7 | 14115 | 3 |
| LAND | 7 | 10307 | 0 |
| MCFT | 17 | 109222 | -4 |
| BLBD | 11 | 19363 | 1 |
| Average | 10.3 | 39007 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $17 million in ZIXI’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Tiziana Life Sciences plc (NASDAQ:TLSA) is the least popular one with only 4 bullish hedge fund positions. Zix Corporation (NASDAQ:ZIXI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZIXI is 17.5. 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 gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on ZIXI as the stock returned 23.1% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
