Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Zedge, Inc. (NYSE:ZDGE), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Zedge, Inc. (NYSE:ZDGE) a buy, sell, or hold? The smart money was getting more optimistic. The number of long hedge fund bets went up by 1 in recent months. Zedge, Inc. (NYSE:ZDGE) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ZDGE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s go over the key hedge fund action encompassing Zedge, Inc. (NYSE:ZDGE).
Do Hedge Funds Think ZDGE Is A Good Stock To Buy Now?
At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ZDGE over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Zedge, Inc. (NYSE:ZDGE) was held by Renaissance Technologies, which reported holding $7.5 million worth of stock at the end of December. It was followed by Kahn Brothers with a $1.8 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Zedge, Inc. (NYSE:ZDGE), around 0.28% of its 13F portfolio. 0 is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to ZDGE.
With a general bullishness amongst the heavyweights, some big names have jumped into Zedge, Inc. (NYSE:ZDGE) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest call position in Zedge, Inc. (NYSE:ZDGE). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new ZDGE investors: Donald Sussman’s Paloma Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s check out hedge fund activity in other stocks similar to Zedge, Inc. (NYSE:ZDGE). We will take a look at Townsquare Media Inc (NYSE:TSQ), Marlin Business Services Corp. (NASDAQ:MRLN), SCYNEXIS Inc (NASDAQ:SCYX), Super League Gaming, Inc. (NASDAQ:SLGG), Innodata Inc (NASDAQ:INOD), C&F Financial Corp (NASDAQ:CFFI), and Bancroft Fund Limited (NYSE:BCV). This group of stocks’ market valuations are closest to ZDGE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSQ | 7 | 28743 | 1 |
| MRLN | 4 | 21279 | -1 |
| SCYX | 5 | 8863 | -1 |
| SLGG | 2 | 642 | 1 |
| INOD | 4 | 7206 | 0 |
| CFFI | 2 | 5942 | 0 |
| BCV | 1 | 52 | 0 |
| Average | 3.6 | 10390 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $11 million in ZDGE’s case. Townsquare Media Inc (NYSE:TSQ) is the most popular stock in this table. On the other hand Bancroft Fund Limited (NYSE:BCV) is the least popular one with only 1 bullish hedge fund positions. Zedge, Inc. (NYSE:ZDGE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZDGE is 77.7. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on ZDGE as the stock returned 49.6% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
