Zillow Inc (NASDAQ:Z) investors should pay attention to a decrease in enthusiasm from smart money recently.
In the eyes of most investors, hedge funds are perceived as worthless, old investment vehicles of years past. While there are more than 8000 funds in operation today, we at Insider Monkey look at the moguls of this club, about 450 funds. Most estimates calculate that this group controls most of the smart money’s total capital, and by tracking their highest performing stock picks, we have brought to light a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Just as key, bullish insider trading sentiment is another way to parse down the marketplace. As the old adage goes: there are many incentives for a bullish insider to sell shares of his or her company, but only one, very simple reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this strategy if “monkeys” understand what to do (learn more here).
Consequently, let’s take a gander at the key action surrounding Zillow Inc (NASDAQ:Z).
Hedge fund activity in Zillow Inc (NASDAQ:Z)
At the end of the first quarter, a total of 12 of the hedge funds we track were bullish in this stock, a change of 0% from the first quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially.
Of the funds we track, Scout Capital Management, managed by James Crichton and Adam Weiss, holds the most valuable position in Zillow Inc (NASDAQ:Z). Scout Capital Management has a $38.3 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is David Gallo of Valinor Management LLC, with a $33.6 million position; 1.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Paul Reeder and Edward Shapiro’s PAR Capital Management, Ken Griffin’s Citadel Investment Group and Daniel Benton’s Andor Capital Management.
Judging by the fact that Zillow Inc (NASDAQ:Z) has faced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their entire stakes at the end of the first quarter. Interestingly, Chase Coleman and Feroz Dewan’s Tiger Global Management LLC sold off the biggest stake of the “upper crust” of funds we monitor, valued at an estimated $14.2 million in stock.. John Thaler’s fund, JAT Capital Management, also sold off its stock, about $3 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
What have insiders been doing with Zillow Inc (NASDAQ:Z)?
Insider buying is most useful when the primary stock in question has seen transactions within the past 180 days. Over the latest half-year time frame, Zillow Inc (NASDAQ:Z) has seen zero unique insiders buying, and 9 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to Zillow Inc (NASDAQ:Z). These stocks are Portfolio Recovery Associates, Inc. (NASDAQ:PRAA), Fair Isaac Corporation (NYSE:FICO), Deluxe Corporation (NYSE:DLX), Healthcare Services Group, Inc. (NASDAQ:HCSG), and The Advisory Board Company (NASDAQ:ABCO). This group of stocks are the members of the business services industry and their market caps resemble Z’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Portfolio Recovery Associates, Inc. (NASDAQ:PRAA) | 4 | 0 | 7 |
| Fair Isaac Corporation (NYSE:FICO) | 13 | 0 | 9 |
| Deluxe Corporation (NYSE:DLX) | 12 | 0 | 7 |
| Healthcare Services Group, Inc. (NASDAQ:HCSG) | 10 | 0 | 3 |
| The Advisory Board Company (NASDAQ:ABCO) | 9 | 0 | 11 |
With the returns demonstrated by our strategies, retail investors should always watch hedge fund and insider trading activity, and Zillow Inc (NASDAQ:Z) applies perfectly to this mantra.
