The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Zogenix, Inc. (NASDAQ:ZGNX).
Is ZGNX a good stock to buy? Zogenix, Inc. (NASDAQ:ZGNX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 38 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that ZGNX 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). At the end of this article we will also compare ZGNX to other stocks including Seacoast Banking Corporation of Florida (NASDAQ:SBCF), ePlus Inc. (NASDAQ:PLUS), and StoneX Group Inc. (NASDAQ:SNEX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 15 best blue chip stocks to buy 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. Now we’re going to take a glance at the latest hedge fund action encompassing Zogenix, Inc. (NASDAQ:ZGNX).
Do Hedge Funds Think ZGNX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in ZGNX a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Zogenix, Inc. (NASDAQ:ZGNX) was held by RA Capital Management, which reported holding $98.4 million worth of stock at the end of September. It was followed by Cadian Capital with a $63.7 million position. Other investors bullish on the company included Farallon Capital, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to Zogenix, Inc. (NASDAQ:ZGNX), around 3.49% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, earmarking 2.07 percent of its 13F equity portfolio to ZGNX.
Since Zogenix, Inc. (NASDAQ:ZGNX) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that slashed their positions entirely in the third quarter. It’s worth mentioning that Joseph Edelman’s Perceptive Advisors dropped the biggest position of the 750 funds watched by Insider Monkey, valued at an estimated $132.5 million in stock, and Arsani William’s Logos Capital was right behind this move, as the fund dropped about $10.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Zogenix, Inc. (NASDAQ:ZGNX). We will take a look at Seacoast Banking Corporation of Florida (NASDAQ:SBCF), ePlus Inc. (NASDAQ:PLUS), StoneX Group Inc. (NASDAQ:SNEX), Tupperware Brands Corporation (NYSE:TUP), Eventbrite, Inc. (NYSE:EB), Nkarta, Inc. (NASDAQ:NKTX), and KKR Real Estate Finance Trust Inc. (NYSE:KREF). This group of stocks’ market values resemble ZGNX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $410 million in ZGNX’s case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Zogenix, Inc. (NASDAQ:ZGNX) is more popular among hedge funds. Our overall hedge fund sentiment score for ZGNX is 85. 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 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 33.3% in 2020 through December 18th and still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on ZGNX, though not to the same extent, as the stock returned 11.5% since the end of September (through December 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.