Hedge Funds Are Selling ZoomInfo Technologies Inc. (ZI)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ZoomInfo Technologies Inc. (NASDAQ:ZI).

ZoomInfo Technologies Inc. (NASDAQ:ZI) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. ZI has experienced a decrease in enthusiasm from smart money recently. There were 31 hedge funds in our database with ZI positions at the end of the fourth quarter. Our calculations also showed that ZI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Christian Leone of Luxor Capital Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s view the latest hedge fund action regarding ZoomInfo Technologies Inc. (NASDAQ:ZI).

Do Hedge Funds Think ZI Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in ZI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Alkeon Capital Management held the most valuable stake in ZoomInfo Technologies Inc. (NASDAQ:ZI), which was worth $70.3 million at the end of the fourth quarter. On the second spot was CaaS Capital which amassed $59.2 million worth of shares. Citadel Investment Group, Shannon River Fund Management, and Candlestick 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 0 allocated the biggest weight to ZoomInfo Technologies Inc. (NASDAQ:ZI), around 3.05% of its 13F portfolio. 0 is also relatively very bullish on the stock, dishing out 1.82 percent of its 13F equity portfolio to ZI.

Seeing as ZoomInfo Technologies Inc. (NASDAQ:ZI) has faced falling interest from the smart money, logic holds that there is a sect of money managers who sold off their full holdings in the first quarter. It’s worth mentioning that Daniel Lascano’s Lomas Capital Management sold off the largest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $57.1 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $22.5 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ZoomInfo Technologies Inc. (NASDAQ:ZI) but similarly valued. We will take a look at Halliburton Company (NYSE:HAL), DISH Network Corp. (NASDAQ:DISH), Xylem Inc (NYSE:XYL), StoneCo Ltd. (NASDAQ:STNE), The Cooper Companies, Inc. (NYSE:COO), FirstEnergy Corp. (NYSE:FE), and MGM Resorts International (NYSE:MGM). This group of stocks’ market valuations are similar to ZI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAL 28 1015940 -3
DISH 51 2205763 -6
XYL 23 846370 2
STNE 39 2157227 -8
COO 43 1378040 12
FE 51 1840599 1
MGM 57 2715848 13
Average 41.7 1737112 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.7 hedge funds with bullish positions and the average amount invested in these stocks was $1737 million. That figure was $319 million in ZI’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 bullish hedge fund positions. ZoomInfo Technologies Inc. (NASDAQ:ZI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZI is 22.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately ZI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ZI investors were disappointed as the stock returned 1.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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