You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Zynga Inc (NASDAQ:ZNGA) a sound investment right now? The best stock pickers are buying. The number of bullish hedge fund positions moved up by 8 in recent months. ZNGA was in 28 hedge funds’ portfolios at the end of the third quarter of 2016. There were 20 hedge funds in our database with ZNGA positions at the end of the previous quarter. At the end of this article we will also compare ZNGA to other stocks including Retail Opportunity Investments Corp (NASDAQ:ROIC), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and Wageworks Inc (NYSE:WAGE) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How are hedge funds trading Zynga Inc (NASDAQ:ZNGA)?
Heading into the fourth quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 40% jump from the second quarter of 2016, pushing ownership of the stock to its highest level in five quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the most valuable position in Zynga Inc (NASDAQ:ZNGA). Eminence Capital has a $167.2 million position in the stock, comprising 2.8% of its 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $57.5 million position. Remaining peers that hold long positions encompass Ross Margolies’ Stelliam Investment Management, Cliff Asness’ AQR Capital Management and Jacob Doft’s Highline Capital Management.
With general bullishness amongst the heavyweights, key hedge funds have jumped into Zynga Inc (NASDAQ:ZNGA) headfirst. Highline Capital Management established the most valuable position in Zynga Inc (NASDAQ:ZNGA). Highline Capital Management had $34.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $12.5 million position during the quarter. The following funds were also among the new ZNGA investors: Leon Shaulov’s Maplelane Capital, Anand Parekh’s Alyeska Investment Group, and Larry Petrella and Michael Siminerio’s PineView Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Zynga Inc (NASDAQ:ZNGA). We will take a look at Retail Opportunity Investments Corp (NASDAQ:ROIC), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Wageworks Inc (NYSE:WAGE), and First Financial Bankshares Inc (NASDAQ:FFIN). All of these stocks’ market caps resemble ZNGA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROIC | 8 | 26035 | 1 |
| CORE | 14 | 57732 | -3 |
| WAGE | 10 | 84067 | -1 |
| FFIN | 4 | 7590 | 1 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $477 million in ZNGA’s case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Zynga Inc (NASDAQ:ZNGA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and grew a lot more bullish on it in Q3, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
