Is ZBRA Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Zebra Technologies Corporation (NASDAQ:ZBRA).

Is ZBRA stock a buy or sell? Zebra Technologies Corporation (NASDAQ:ZBRA) was in 41 hedge funds’ portfolios at the end of December. The all time high for this statistic is 44. ZBRA investors should pay attention to a decrease in enthusiasm from smart money of late. There were 44 hedge funds in our database with ZBRA holdings at the end of September. Our calculations also showed that ZBRA isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here).

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Zebra Technologies Corporation (NASDAQ:ZBRA).

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

At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Cedar Rock Capital held the most valuable stake in Zebra Technologies Corporation (NASDAQ:ZBRA), which was worth $483.7 million at the end of the fourth quarter. On the second spot was Ariel Investments which amassed $65.6 million worth of shares. Goodnow Investment Group, Arrowstreet 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 Cedar Rock Capital allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 10.46% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, setting aside 9.54 percent of its 13F equity portfolio to ZBRA.

Judging by the fact that Zebra Technologies Corporation (NASDAQ:ZBRA) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their positions entirely in the fourth quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the largest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $20.8 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $19.9 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in the fourth quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Zebra Technologies Corporation (NASDAQ:ZBRA) but similarly valued. These stocks are CGI Inc. (NYSE:GIB), Canon Inc. (NYSE:CAJ), Synchrony Financial (NYSE:SYF), SVB Financial Group (NASDAQ:SIVB), EPAM Systems Inc (NYSE:EPAM), Group Limited (NASDAQ:TCOM), and Entergy Corporation (NYSE:ETR). All of these stocks’ market caps are similar to ZBRA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GIB 15 128389 -5
CAJ 7 58073 0
SYF 50 2464559 4
SIVB 31 707703 4
EPAM 32 616823 -1
TCOM 34 1667634 4
ETR 36 829666 9
Average 29.3 924692 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $925 million. That figure was $911 million in ZBRA’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. Zebra Technologies Corporation (NASDAQ:ZBRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZBRA is 69.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on ZBRA as the stock returned 19.7% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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