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Hedge Funds Are Coming Back To ZTO Express (Cayman) Inc. (ZTO)

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 at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded ZTO Express (Cayman) Inc. (NYSE:ZTO) and determine whether the smart money was really smart about this stock.

ZTO Express (Cayman) Inc. (NYSE:ZTO) shareholders have witnessed an increase in support from the world’s most elite money managers recently. ZTO Express (Cayman) Inc. (NYSE:ZTO) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. There were 15 hedge funds in our database with ZTO positions at the end of the first quarter. Our calculations also showed that ZTO isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.

Kerr Neilson of Platinum Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing ZTO Express (Cayman) Inc. (NYSE:ZTO).

What have hedge funds been doing with ZTO Express (Cayman) Inc. (NYSE:ZTO)?

At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ZTO over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Platinum Asset Management was the largest shareholder of ZTO Express (Cayman) Inc. (NYSE:ZTO), with a stake worth $315.4 million reported as of the end of September. Trailing Platinum Asset Management was Renaissance Technologies, which amassed a stake valued at $127.5 million. Hillhouse Capital Management, Tairen Capital, and AQR 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 Platinum Asset Management allocated the biggest weight to ZTO Express (Cayman) Inc. (NYSE:ZTO), around 7.2% of its 13F portfolio. Tairen Capital is also relatively very bullish on the stock, designating 6.53 percent of its 13F equity portfolio to ZTO.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), assembled the biggest position in ZTO Express (Cayman) Inc. (NYSE:ZTO). Schonfeld Strategic Advisors had $1.7 million invested in the company at the end of the quarter. Ronald Hua’s Qtron Investments also initiated a $1.7 million position during the quarter. The following funds were also among the new ZTO investors: Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw, and Noam Gottesman’s GLG Partners.

Let’s also examine hedge fund activity in other stocks similar to ZTO Express (Cayman) Inc. (NYSE:ZTO). These stocks are Eversource Energy (NYSE:ES), Capital One Financial Corp. (NYSE:COF), Amphenol Corporation (NYSE:APH), T. Rowe Price Group, Inc. (NASDAQ:TROW), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Alcon Inc. (NYSE:ALC), and CoStar Group Inc (NASDAQ:CSGP). All of these stocks’ market caps match ZTO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ES 28 501377 2
COF 55 1908354 5
APH 42 1013347 0
TROW 34 337582 10
IDXX 40 417149 9
ALC 21 584000 -4
CSGP 50 2267394 10
Average 38.6 1004172 4.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1004 million. That figure was $716 million in ZTO’s case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks ZTO Express (Cayman) Inc. (NYSE:ZTO) is even less popular than ALC. Our overall hedge fund sentiment score for ZTO is 30.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards ZTO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September but managed to beat the market by 19.3 percentage points. Unfortunately ZTO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ZTO investors were disappointed as the stock returned -18.5% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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