HIs ZYXI A Good Stock To Buy Now?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Zynex, Inc. (NASDAQ:ZYXI).

Is ZYXI a good stock to buy now? Zynex, Inc. (NASDAQ:ZYXI) investors should be aware of an increase in enthusiasm from smart money of late. Zynex, Inc. (NASDAQ:ZYXI) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ZYXI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Peter Algert of Algert Global

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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s take a look at the new hedge fund action regarding Zynex, Inc. (NASDAQ:ZYXI).

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

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in ZYXI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Zynex, Inc. (NASDAQ:ZYXI). Millennium Management has a $3.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Mark Coe of Intrinsic Edge Capital, with a $2.5 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers that are bullish include Ken Griffin’s Citadel Investment Group, Guy Levy’s Soleus Capital and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Soleus Capital allocated the biggest weight to Zynex, Inc. (NASDAQ:ZYXI), around 1.09% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.74 percent of its 13F equity portfolio to ZYXI.

As aggregate interest increased, key hedge funds have jumped into Zynex, Inc. (NASDAQ:ZYXI) headfirst. Intrinsic Edge Capital, managed by Mark Coe, assembled the largest position in Zynex, Inc. (NASDAQ:ZYXI). Intrinsic Edge Capital had $2.5 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $1.3 million investment in the stock during the quarter. The other funds with brand new ZYXI positions are Peter Algert’s Algert Global, Roger Ibbotson’s Zebra Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks similar to Zynex, Inc. (NASDAQ:ZYXI). These stocks are Quanex Building Products Corporation (NYSE:NX), State Auto Financial Corporation (NASDAQ:STFC), iClick Interactive Asia Group Limited (NASDAQ:ICLK), Relmada Therapeutics, Inc. (NASDAQ:RLMD), Hanger, Inc. (NYSE:HNGR), Impinj, Inc. (NASDAQ:PI), and Camtek LTD. (NASDAQ:CAMT). All of these stocks’ market caps resemble ZYXI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NX 16 59379 2
STFC 8 7154 2
ICLK 13 23328 9
RLMD 8 123424 -3
HNGR 14 57038 0
PI 17 186649 -5
CAMT 8 38114 0
Average 12 70727 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $15 million in ZYXI’s case. Impinj, Inc. (NASDAQ:PI) is the most popular stock in this table. On the other hand State Auto Financial Corporation (NASDAQ:STFC) is the least popular one with only 8 bullish hedge fund positions. Zynex, Inc. (NASDAQ:ZYXI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZYXI is 47.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately ZYXI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ZYXI investors were disappointed as the stock returned -20.6% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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