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Hedge Funds Are Buying Zealand Pharma A/S (ZEAL)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Zealand Pharma A/S (NASDAQ:ZEAL) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Zealand Pharma A/S (NASDAQ:ZEAL) was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. ZEAL investors should be aware of an increase in hedge fund sentiment in recent months. There were 2 hedge funds in our database with ZEAL holdings at the end of the previous quarter. Our calculations also showed that ZEAL isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Chuck Royce

Chuck Royce of Royce & Associates

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the fresh hedge fund action encompassing Zealand Pharma A/S (NASDAQ:ZEAL).

What have hedge funds been doing with Zealand Pharma A/S (NASDAQ:ZEAL)?

Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in ZEAL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ZEAL_nov2019

Among these funds, Farallon Capital held the most valuable stake in Zealand Pharma A/S (NASDAQ:ZEAL), which was worth $25.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.3 million worth of shares. Royce & Associates was 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 Farallon Capital allocated the biggest weight to Zealand Pharma A/S (NASDAQ:ZEAL), around 0.26% of its portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.0024 percent of its 13F equity portfolio to ZEAL.

As aggregate interest increased, key hedge funds were breaking ground themselves. Renaissance Technologies assembled the biggest position in Zealand Pharma A/S (NASDAQ:ZEAL). Renaissance Technologies had $0.3 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Zealand Pharma A/S (NASDAQ:ZEAL) but similarly valued. We will take a look at General American Investors Company, Inc. (NYSE:GAM), Model N Inc (NYSE:MODN), Franklin Street Properties Corp. (NYSEAMEX:FSP), and Standex Int’l Corp. (NYSE:SXI). This group of stocks’ market caps are closest to ZEAL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GAM 5 27837 0
MODN 18 155372 6
FSP 8 41686 2
SXI 16 43739 7
Average 11.75 67159 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $26 million in ZEAL’s case. Model N Inc (NYSE:MODN) is the most popular stock in this table. On the other hand General American Investors Company, Inc. (NYSE:GAM) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Zealand Pharma A/S (NASDAQ:ZEAL) is even less popular than GAM. Hedge funds clearly dropped the ball on ZEAL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on ZEAL as the stock returned 21.1% during the fourth quarter (through 11/22) and outperformed the market by an even larger margin.

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

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