The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtZillow Group Inc (NASDAQ:Z) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Hedge fund interest in Zillow Group Inc (NASDAQ:Z) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Clarivate Plc (NYSE:CCC), The Western Union Company (NYSE:WU), and Monolithic Power Systems, Inc. (NASDAQ:MPWR) to gather more data points. Our calculations also showed that Z isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Price of MFP Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s go over the new hedge fund action regarding Zillow Group Inc (NASDAQ:Z).
Hedge fund activity in Zillow Group Inc (NASDAQ:Z)
At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards Z over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, SRS Investment Management was the largest shareholder of Zillow Group Inc (NASDAQ:Z), with a stake worth $350.2 million reported as of the end of September. Trailing SRS Investment Management was Eminence Capital, which amassed a stake valued at $158.3 million. Valiant Capital, Dorsal Capital Management, and Matrix Capital Management 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 Thrive Capital allocated the biggest weight to Zillow Group Inc (NASDAQ:Z), around 41.85% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, designating 13.95 percent of its 13F equity portfolio to Z.
Since Zillow Group Inc (NASDAQ:Z) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers who sold off their full holdings by the end of the first quarter. Intriguingly, Josh Resnick’s Jericho Capital Asset Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising close to $30.7 million in stock, and Gilchrist Berg’s Water Street Capital was right behind this move, as the fund dumped about $14.8 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Zillow Group Inc (NASDAQ:Z). These stocks are Clarivate Plc (NYSE:CCC), The Western Union Company (NYSE:WU), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and Peloton Interactive, Inc. (NASDAQ:PTON). This group of stocks’ market caps are closest to Z’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCC | 28 | 818151 | -17 |
| WU | 34 | 339513 | 5 |
| MPWR | 23 | 390299 | -4 |
| PTON | 36 | 748425 | 6 |
| Average | 30.25 | 574097 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $574 million. That figure was $1369 million in Z’s case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand Monolithic Power Systems, Inc. (NASDAQ:MPWR) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Zillow Group Inc (NASDAQ:Z) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on Z as the stock returned 59.9% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
