Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Zillow Group Inc (NASDAQ:Z).
Is Zillow Group Inc (NASDAQ:Z) a good investment now? Hedge funds are taking an optimistic view. The number of long hedge fund bets advanced by 1 in recent months. Z was in 24 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with Z positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Quanta Services Inc (NYSE:PWR), Acadia Healthcare Company Inc (NASDAQ:ACHC), and Carter’s, Inc. (NYSE:CRI) to gather more data points.
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With all of this in mind, we’re going to take a look at the fresh action encompassing Zillow Group Inc (NASDAQ:Z).
How are hedge funds trading Zillow Group Inc (NASDAQ:Z)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Philippe Laffont’s Coatue Management has the largest position in Zillow Group Inc (NASDAQ:Z), worth close to $71.8 million, accounting for 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Altimeter Capital Management, led by Brad Gerstner, holding a $46.4 million position; the fund has 3% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Christopher R. Hansen’s Valiant Capital, Philippe Laffont’s Coatue Management and David Greenspan’s Slate Path Capital.
As one would reasonably expect, key money managers have been driving this bullishness. Coatue Management, managed by Philippe Laffont, created the most outsized position in Zillow Inc (NASDAQ:Z). Coatue Management had $71.8 million invested in the company at the end of the quarter. Brad Gerstner’s Altimeter Capital Management also initiated a $46.4 million position during the quarter. The other funds with brand new Z positions are Christopher R. Hansen’s Valiant Capital, David Greenspan’s Slate Path Capital, and Kerr Neilson’s Platinum Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Zillow Group Inc (NASDAQ:Z) but similarly valued. These stocks are Quanta Services Inc (NYSE:PWR), Acadia Healthcare Company Inc (NASDAQ:ACHC), Carter’s, Inc. (NYSE:CRI), and Liberty Property Trust (NYSE:LPT). All of these stocks’ market caps are similar to Z’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PWR | 30 | 488718 | -8 |
| ACHC | 24 | 225903 | 1 |
| CRI | 46 | 1060432 | 0 |
| LPT | 19 | 119291 | 6 |
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $392 million in Z’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Liberty Property Trust (NYSE:LPT) is the least popular one with only 19 bullish hedge fund positions. Zillow Group Inc (NASDAQ:Z) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRI might be a better candidate to consider a long position.
