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 Zovio Inc. (NASDAQ:ZVO).
Is ZVO a good stock to buy now? The smart money was getting more optimistic. The number of bullish hedge fund bets advanced by 2 lately. Zovio Inc. (NASDAQ:ZVO) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 18. Our calculations also showed that ZVO 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind let’s go over the fresh hedge fund action encompassing Zovio Inc. (NASDAQ:ZVO).
Do Hedge Funds Think ZVO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZVO 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.
Among these funds, Nantahala Capital Management held the most valuable stake in Zovio Inc. (NASDAQ:ZVO), which was worth $11.4 million at the end of the third quarter. On the second spot was Prescott Group Capital Management which amassed $8.3 million worth of shares. Renaissance Technologies, Venator Capital Management, and Arrowstreet Capital 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 Prescott Group Capital Management allocated the biggest weight to Zovio Inc. (NASDAQ:ZVO), around 3.7% of its 13F portfolio. Venator Capital Management is also relatively very bullish on the stock, designating 0.83 percent of its 13F equity portfolio to ZVO.
As one would reasonably expect, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Zovio Inc. (NASDAQ:ZVO). Arrowstreet Capital had $1.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.1 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Zovio Inc. (NASDAQ:ZVO) but similarly valued. These stocks are AgroFresh Solutions Inc (NASDAQ:AGFS), MMA Capital Holdings Inc. (NASDAQ:MMAC), Select Bancorp, Inc. (NASDAQ:SLCT), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), Platinum Group Metals Limited (NYSE:PLG), Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), and NACCO Industries, Inc. (NYSE:NC). This group of stocks’ market values are closest to ZVO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGFS | 3 | 1438 | -1 |
| MMAC | 3 | 4082 | 0 |
| SLCT | 5 | 10900 | 0 |
| ACRX | 5 | 6850 | 2 |
| PLG | 3 | 3394 | -1 |
| CVLY | 4 | 14459 | 0 |
| NC | 4 | 6624 | -1 |
| Average | 3.9 | 6821 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $32 million in ZVO’s case. Select Bancorp, Inc. (NASDAQ:SLCT) is the most popular stock in this table. On the other hand AgroFresh Solutions Inc (NASDAQ:AGFS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Zovio Inc. (NASDAQ:ZVO) is more popular among hedge funds. Our overall hedge fund sentiment score for ZVO is 73.7. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately ZVO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ZVO were disappointed as the stock returned 5.3% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
