Was The Smart Money Right About Zillow Group Inc (Z)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Zillow Group Inc (NASDAQ:Z).

Is Zillow Group Inc (NASDAQ:Z) the right pick for your portfolio? Prominent investors were becoming less hopeful. The number of bullish hedge fund positions fell by 6 lately. Zillow Group Inc (NASDAQ:Z) was in 76 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 83. Our calculations also showed that Z isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Philippe Laffont of Coatue Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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. With all of this in mind let’s take a peek at the fresh hedge fund action regarding Zillow Group Inc (NASDAQ:Z).

Do Hedge Funds Think Z Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 76 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. By comparison, 59 hedge funds held shares or bullish call options in Z a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Catherine D. Wood’s 0 has the largest position in Zillow Group Inc (NASDAQ:Z), worth close to $1.2405 billion, accounting for 2.3% of its total 13F portfolio. On ARK Investment Management’s heels is 0, led by Karthik Sarma, holding a $892.8 million position; 13.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Philippe Laffont’s 0, Gil Simon’s 0 and Nancy Zevenbergen’s 0. In terms of the portfolio weights assigned to each position Kuvari Partners allocated the biggest weight to Zillow Group Inc (NASDAQ:Z), around 26.46% of its 13F portfolio. SRS Investment Management is also relatively very bullish on the stock, setting aside 13.23 percent of its 13F equity portfolio to Z.

Due to the fact that Zillow Group Inc (NASDAQ:Z) has faced bearish sentiment from hedge fund managers, it’s easy to see that there were a few funds that slashed their full holdings last quarter. It’s worth mentioning that Dan Loeb’s Third Point said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $140.7 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund dropped about $83.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Zillow Group Inc (NASDAQ:Z). These stocks are ANSYS, Inc. (NASDAQ:ANSS), Fomento Economico Mexicano SAB (NYSE:FMX), SVB Financial Group (NASDAQ:SIVB), Public Service Enterprise Group Incorporated (NYSE:PEG), Sun Life Financial Inc. (NYSE:SLF), Ecopetrol S.A. (NYSE:EC), and Nokia Corporation (NYSE:NOK). All of these stocks’ market caps resemble Z’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $640 million. That figure was $5244 million in Z’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Zillow Group Inc (NASDAQ:Z) is more popular among hedge funds. Our overall hedge fund sentiment score for Z is 76.5. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately Z wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on Z were disappointed as the stock returned -15.2% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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