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Hedge Funds Have Never Been This Bullish On Zayo Group Holdings Inc (ZAYO)

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Is Zayo Group Holdings Inc (NYSE:ZAYO) undervalued? The smart money is buying. The number of long hedge fund bets advanced by 5 in recent months. Our calculations also showed that ZAYO isn’t among the 30 most popular stocks among hedge funds.

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Jeff Smith

Let’s take a look at the key hedge fund action encompassing Zayo Group Holdings Inc (NYSE:ZAYO).

What have hedge funds been doing with Zayo Group Holdings Inc (NYSE:ZAYO)?

At the end of the first quarter, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZAYO over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

ZAYO_jun2019

Among these funds, Citadel Investment Group held the most valuable stake in Zayo Group Holdings Inc (NYSE:ZAYO), which was worth $222.1 million at the end of the first quarter. On the second spot was Sachem Head Capital which amassed $164.8 million worth of shares. Moreover, Senator Investment Group, Eminence Capital, and Starboard Value LP were also bullish on Zayo Group Holdings Inc (NYSE:ZAYO), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Eminence Capital, managed by Ricky Sandler, initiated the largest position in Zayo Group Holdings Inc (NYSE:ZAYO). Eminence Capital had $156.2 million invested in the company at the end of the quarter. Jeffrey Smith’s Starboard Value LP also initiated a $116.5 million position during the quarter. The other funds with new positions in the stock are Dennis Puri and Oliver Keller’s Hunt Lane Capital, Benjamin Pass’s TOMS Capital, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s also examine hedge fund activity in other stocks similar to Zayo Group Holdings Inc (NYSE:ZAYO). These stocks are Genpact Limited (NYSE:G), AerCap Holdings N.V. (NYSE:AER), Gerdau SA (NYSE:GGB), and Guardant Health, Inc. (NASDAQ:GH). This group of stocks’ market values are closest to ZAYO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
G 29 600991 7
AER 23 792415 -8
GGB 10 168753 -2
GH 14 174703 7
Average 19 434216 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $1681 million in ZAYO’s case. Genpact Limited (NYSE:G) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Zayo Group Holdings Inc (NYSE:ZAYO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ZAYO as the stock returned 14.4% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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