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Is Zendesk Inc (ZEN) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Zendesk Inc (NYSE:ZEN) a worthy investment right now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions dropped by 2 lately. At the end of this article we will also compare Zendesk Inc (NYSE:ZEN) to other stocks including DineEquity Inc (NYSE:DIN), ICU Medical, Incorporated (NASDAQ:ICUI), and EXACT Sciences Corporation (NASDAQ:EXAS) to get a better sense of its popularity.

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Today there are plenty of formulas stock traders employ to analyze their holdings. A couple of the most useful formulas are hedge fund and insider trading interest. Experts at hedge fund tracking site Insider Monkey have shown that, historically, those who follow the top picks of the elite fund managers can outclass the broader indices by a superb margin (see the details here).

Now, we’re going to take a glance at the recent action regarding Zendesk Inc (NYSE:ZEN).

What have hedge funds been doing with Zendesk Inc (NYSE:ZEN)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long in this stock, a drop of 9% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jericho Capital Asset Management, managed by Josh Resnick, holds the biggest position in Zendesk Inc (NYSE:ZEN). Jericho Capital Asset Management has a $80.1 million position in the stock, comprising 5% of its 13F portfolio. Sitting at the No. 2 spot is Alex Sacerdote of Whale Rock Capital Management, with a $57.2 million position; 5.7% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of Ken Griffin’s Citadel Investment Group, Brad Gerstner’s Altimeter Capital Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital.

Due to the fact that Zendesk Inc (NYSE:ZEN) has witnessed a declination in interest from hedge fund managers, we can see that there lies a certain “tier” of funds who were dropping their full holdings in the third quarter. Interestingly, Renaissance Technologies cut the biggest position of the 700 funds monitored by Insider Monkey, totaling about $3.7 million in stock, and Jane Mendillo of Harvard Management Co was right behind this move, as the fund dropped about $1.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s also take a look at hedge fund activity in other stocks similar to Zendesk Inc (NYSE:ZEN). We will take a look at DineEquity Inc (NYSE:DIN), ICU Medical, Incorporated (NASDAQ:ICUI), EXACT Sciences Corporation (NASDAQ:EXAS), and DeVry Inc. (NYSE:DV). All of these stocks’ market caps are similar to Zendesk Inc (NYSE:ZEN)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DIN 17 217081 -6
ICUI 17 177509 -2
EXAS 17 159643 0
DV 16 535765 0

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. DineEquity Inc (NYSE:DIN) is the most popular stock in this table and Zendesk Inc (NYSE:ZEN) managed to capture even more attention from hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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