Zeltiq Aesthetics Inc (ZLTQ): Are Hedge Funds Right About This Stock?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) worth your attention right now? Hedge funds are taking a bearish view. The number of long hedge fund bets decreased by 1 lately. At the end of this article we will also compare ZLTQ to other stocks including Cambrex Corporation (NYSE:CBM), Cogent Communications Holdings Inc. (NASDAQ:CCOI), and Luxoft Holding Inc (NYSE:LXFT) to get a better sense of its popularity.

In today’s marketplace there are a large number of metrics market participants use to assess stocks. A pair of the most innovative metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top fund managers can outpace their index-focused peers by a significant amount (see the details here).

Now, let’s take a gander at the new action regarding Zeltiq Aesthetics Inc (NASDAQ:ZLTQ).

How have hedgies been trading Zeltiq Aesthetics Inc (NASDAQ:ZLTQ)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Aisling Capital, managed by Dennis Purcell, holds the number one position in Zeltiq Aesthetics Inc (NASDAQ:ZLTQ). Aisling Capital has an $83.4 million position in the stock, comprising 14.7% of its 13F portfolio. Coming in second is Steve Cohen of Point72 Asset Management, with an $46.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Jacob Gottlieb’s Visium Asset Management, Israel Englander’s Millennium Management and Zach Schreiber’s Point State Capital.

Because Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of money managers who sold off their positions entirely in the third quarter. It’s worth mentioning that Mark Kingdon’s Kingdon Capital dropped the largest position of all the hedgies followed by Insider Monkey, comprising close to $11.4 million in stock. Jim Simons’ fund, Renaissance Technologies, also said goodbye to its stock, about $3.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Zeltiq Aesthetics Inc (NASDAQ:ZLTQ). We will take a look at Cambrex Corporation (NYSE:CBM), Cogent Communications Holdings Inc. (NASDAQ:CCOI), Luxoft Holding Inc (NYSE:LXFT), and Phibro Animal Health Corp (NASDAQ:PAHC). All of these stocks’ market caps are similar to ZLTQ’s market cap.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $338 million in ZLTQ’s case. Cambrex Corporation (NYSE:CBM) is the most popular stock in this table. On the other hand Phibro Animal Health Corp (NASDAQ:PAHC) is the least popular one with only 16 bullish hedge fund positions. Along with CBM, Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) is the most popular stock in this group and that makes it worth a closer look.