In this article we are going to use hedge fund sentiment as a tool and determine whether Zoetis Inc (NYSE:ZTS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is ZTS a good stock to buy? Hedge fund interest in Zoetis Inc (NYSE:ZTS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ZTS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare ZTS to other stocks including Prologis Inc (NYSE:PLD), Altria Group Inc (NYSE:MO), and Fidelity National Information Services Inc. (NYSE:FIS) to get a better sense of its popularity.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
William Von Mueffling of Cantillon Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s view the recent hedge fund action encompassing Zoetis Inc (NYSE:ZTS).
Do Hedge Funds Think ZTS Is A Good Stock To Buy Now?
At Q2’s end, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZTS over the last 24 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.
When looking at the institutional investors followed by Insider Monkey, Nicolai Tangen’s 0 has the biggest position in Zoetis Inc (NYSE:ZTS), worth close to $453.3 million, corresponding to 5.1% of its total 13F portfolio. The second most bullish fund manager is 0, led by William von Mueffling, holding a $418.1 million position; 2.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise Barry Dargan’s 0, Paul Marshall and Ian Wace’s 0 and Peter Rathjens, Bruce Clarke and John Campbell’s 0. In terms of the portfolio weights assigned to each position Ako Capital allocated the biggest weight to Zoetis Inc (NYSE:ZTS), around 5.11% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, earmarking 5.05 percent of its 13F equity portfolio to ZTS.
Judging by the fact that Zoetis Inc (NYSE:ZTS) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who sold off their positions entirely in the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest investment of all the hedgies followed by Insider Monkey, comprising about $112.6 million in stock, and Terry Smith’s Fundsmith Long/Short Fund was right behind this move, as the fund dumped about $4.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
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 Prologis Inc (NYSE:PLD), Altria Group Inc (NYSE:MO), Fidelity National Information Services Inc. (NYSE:FIS), Mondelez International Inc (NASDAQ:MDLZ), NIO Inc. (NYSE:NIO), Gilead Sciences, Inc. (NASDAQ:GILD), and General Motors Company (NYSE:GM). This group of stocks’ market valuations are similar to ZTS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLD | 40 | 563748 | 1 |
| MO | 47 | 948996 | 9 |
| FIS | 72 | 7369909 | -2 |
| MDLZ | 53 | 2946868 | 8 |
| NIO | 34 | 2066911 | 6 |
| GILD | 54 | 1732734 | -11 |
| GM | 86 | 7414862 | 0 |
| Average | 55.1 | 3292004 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.1 hedge funds with bullish positions and the average amount invested in these stocks was $3292 million. That figure was $2706 million in ZTS’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 34 bullish hedge fund positions. Zoetis Inc (NYSE:ZTS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZTS is 56.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on ZTS as the stock returned 6.3% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Zoetis Inc. (NYSE:ZTS)
Follow Zoetis Inc. (NYSE:ZTS)
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Disclosure: None. This article was originally published at Insider Monkey.
