Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 18.7% compared to 12.1%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Zscaler, Inc. (NASDAQ:ZS) has seen an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that zs isn’t among the 30 most popular stocks among hedge funds.
According to most shareholders, hedge funds are seen as slow, old investment vehicles of years past. While there are more than 8000 funds in operation today, We choose to focus on the elite of this club, around 750 funds. These money managers manage bulk of the hedge fund industry’s total asset base, and by shadowing their top stock picks, Insider Monkey has deciphered a number of investment strategies that have historically outpaced the market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Matthew Hulsizer of PEAK6 Capital
We’re going to take a gander at the latest hedge fund action encompassing Zscaler, Inc. (NASDAQ:ZS).
How are hedge funds trading Zscaler, Inc. (NASDAQ:ZS)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ZS over the last 15 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D. E. Shaw’s D E Shaw has the most valuable position in Zscaler, Inc. (NASDAQ:ZS), worth close to $128.1 million, corresponding to 0.2% of its total 13F portfolio. On D E Shaw’s heels is Matthew Hulsizer of PEAK6 Capital Management, with a $51.6 million call position; 0.3% of its 13F portfolio is allocated to the company. Some other peers with similar optimism contain Jim Simons’s Renaissance Technologies, Panayotis Takis Sparaggis’s Alkeon Capital Management and Richard Driehaus’s Driehaus Capital.
Consequently, key money managers have jumped into Zscaler, Inc. (NASDAQ:ZS) headfirst. PDT Partners, managed by Peter Muller, assembled the biggest position in Zscaler, Inc. (NASDAQ:ZS). PDT Partners had $10 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $6 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Larry Chen and Terry Zhang’s Tairen Capital, and Guy Shahar’s DSAM Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Zscaler, Inc. (NASDAQ:ZS) but similarly valued. These stocks are Brookfield Property Partners LP (NASDAQ:BPY), Everest Re Group Ltd (NYSE:RE), The Trade Desk, Inc. (NASDAQ:TTD), and RingCentral Inc (NYSE:RNG). This group of stocks’ market valuations match ZS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPY | 8 | 76215 | 0 |
| RE | 19 | 538369 | -8 |
| TTD | 25 | 492679 | 9 |
| RNG | 43 | 1207897 | -5 |
| Average | 23.75 | 578790 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $301 million in ZS’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) is the least popular one with only 8 bullish hedge fund positions. Zscaler, Inc. (NASDAQ:ZS) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on ZS as the stock returned 2.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
