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Is Zebra Technologies Corporation (ZBRA) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Zebra Technologies Corporation (NASDAQ:ZBRA) based on that data.

Is Zebra Technologies Corporation (NASDAQ:ZBRA) a buy here? Investors who are in the know are in a bearish mood. The number of long hedge fund bets fell by 6 lately. Our calculations also showed that ZBRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ZBRA was in 28 hedge funds’ portfolios at the end of March. There were 34 hedge funds in our database with ZBRA holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Thomas Bancroft - Makaira Partners

Thomas Bancroft of Makaira Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the new hedge fund action encompassing Zebra Technologies Corporation (NASDAQ:ZBRA).

How are hedge funds trading Zebra Technologies Corporation (NASDAQ:ZBRA)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in ZBRA a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Cedar Rock Capital was the largest shareholder of Zebra Technologies Corporation (NASDAQ:ZBRA), with a stake worth $202.4 million reported as of the end of September. Trailing Cedar Rock Capital was Ariel Investments, which amassed a stake valued at $91.6 million. Goodnow Investment Group, Makaira Partners, and Adage 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 Makaira Partners allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 17.6% of its 13F portfolio. Goodnow Investment Group is also relatively very bullish on the stock, designating 14.6 percent of its 13F equity portfolio to ZBRA.

Since Zebra Technologies Corporation (NASDAQ:ZBRA) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there were a few hedge funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Donald Sussman’s Paloma Partners dumped the biggest position of all the hedgies monitored by Insider Monkey, valued at an estimated $26.8 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $24 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 6 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Zebra Technologies Corporation (NASDAQ:ZBRA) but similarly valued. These stocks are FactSet Research Systems Inc. (NYSE:FDS), Synchrony Financial (NYSE:SYF), Moderna, Inc. (NASDAQ:MRNA), and Tractor Supply Company (NASDAQ:TSCO). This group of stocks’ market caps resemble ZBRA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FDS 21 210129 -3
SYF 37 1011642 -7
MRNA 25 424500 13
TSCO 37 510015 -7
Average 30 539072 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $576 million in ZBRA’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 21 bullish hedge fund positions. Zebra Technologies Corporation (NASDAQ:ZBRA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on ZBRA as the stock returned 42.3% during the second quarter and outperformed the market by an even larger margin.

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