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Did Hedge Funds Drop The Ball On Zumiez Inc. (ZUMZ) ?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Zumiez Inc. (NASDAQ:ZUMZ).

Zumiez Inc. (NASDAQ:ZUMZ) shareholders have witnessed a decrease in hedge fund interest lately. ZUMZ was in 12 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with ZUMZ holdings at the end of the previous quarter. Our calculations also showed that zumz isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Let’s review the new hedge fund action surrounding Zumiez Inc. (NASDAQ:ZUMZ).

What have hedge funds been doing with Zumiez Inc. (NASDAQ:ZUMZ)?

At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ZUMZ over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ZUMZ Positions

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Zumiez Inc. (NASDAQ:ZUMZ). Renaissance Technologies has a $16.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $6.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions contain Dmitry Balyasny’s Balyasny Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group.

Seeing as Zumiez Inc. (NASDAQ:ZUMZ) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedge funds who were dropping their entire stakes in the third quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners dropped the largest investment of the 700 funds followed by Insider Monkey, comprising about $10.2 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund cut about $3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Zumiez Inc. (NASDAQ:ZUMZ). These stocks are Costamare Inc (NYSE:CMRE), Epizyme Inc (NASDAQ:EPZM), Hometrust Bancshares Inc (NASDAQ:HTBI), and Transenterix Inc (NYSE:TRXC). This group of stocks’ market values resemble ZUMZ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMRE 10 11291 2
EPZM 18 120880 3
HTBI 9 65265 0
TRXC 8 11314 -6
Average 11.25 52188 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $38 million in ZUMZ’s case. Epizyme Inc (NASDAQ:EPZM) is the most popular stock in this table. On the other hand Transenterix Inc (NYSE:TRXC) is the least popular one with only 8 bullish hedge fund positions. Zumiez Inc. (NASDAQ:ZUMZ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on ZUMZ as the stock returned 37.8% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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