Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Zimmer Biomet Holdings Inc (NYSE:ZBH).
Is Zimmer Biomet Holdings Inc (NYSE:ZBH) a buy right now? Hedge funds were taking a pessimistic view. The number of bullish hedge fund bets fell by 2 in recent months. Zimmer Biomet Holdings Inc (NYSE:ZBH) was in 48 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 64. Our calculations also showed that ZBH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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. Keeping this in mind we’re going to analyze the recent hedge fund action regarding Zimmer Biomet Holdings Inc (NYSE:ZBH).
Do Hedge Funds Think ZBH Is A Good Stock To Buy Now?
At the end of June, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. By comparison, 62 hedge funds held shares or bullish call options in ZBH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, 0 held the most valuable stake in Zimmer Biomet Holdings Inc (NYSE:ZBH), which was worth $475.1 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $189.4 million worth of shares. D E Shaw, Third Point, and Healthcor Management LP 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 Healthcor Management LP allocated the biggest weight to Zimmer Biomet Holdings Inc (NYSE:ZBH), around 4.91% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, designating 3.68 percent of its 13F equity portfolio to ZBH.
Because Zimmer Biomet Holdings Inc (NYSE:ZBH) has faced bearish sentiment from the smart money, it’s easy to see that there were a few funds who sold off their full holdings in the second quarter. It’s worth mentioning that Stephen DuBois’s Camber Capital Management said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, valued at about $100.1 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also said goodbye to its stock, about $56.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Zimmer Biomet Holdings Inc (NYSE:ZBH). These stocks are Rockwell Automation Inc. (NYSE:ROK), Chewy, Inc. (NYSE:CHWY), Stanley Black & Decker, Inc. (NYSE:SWK), First Republic Bank (NYSE:FRC), Wayfair Inc (NYSE:W), Cloudflare, Inc. (NYSE:NET), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks’ market values resemble ZBH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROK | 25 | 535840 | -1 |
| CHWY | 43 | 634747 | 11 |
| SWK | 44 | 987529 | 11 |
| FRC | 34 | 1226197 | -7 |
| W | 35 | 3902769 | -2 |
| NET | 43 | 862578 | -2 |
| LBRDK | 63 | 7386186 | -7 |
| Average | 41 | 2219407 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $2219 million. That figure was $1785 million in ZBH’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Zimmer Biomet Holdings Inc (NYSE:ZBH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZBH is 55.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately ZBH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ZBH were disappointed as the stock returned -11.8% since the end of June (through 11/5) 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 many of these stocks already outperformed the market since 2019.
Follow Zimmer Biomet Holdings Inc. (NYSE:ZBH)
Follow Zimmer Biomet Holdings Inc. (NYSE:ZBH)
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Disclosure: None. This article was originally published at Insider Monkey.
