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 ZoomInfo Technologies Inc. (NASDAQ:ZI).
Is ZI a good stock to buy now? Hedge funds were in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 2 in recent months. ZoomInfo Technologies Inc. (NASDAQ:ZI) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that ZI 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). There were 24 hedge funds in our database with ZI positions at the end of the second 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. With all of this in mind let’s take a look at the recent hedge fund action surrounding ZoomInfo Technologies Inc. (NASDAQ:ZI).
Do Hedge Funds Think ZI Is A Good Stock To Buy Now?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in ZI a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Shannon River Fund Management, managed by Spencer M. Waxman, holds the number one position in ZoomInfo Technologies Inc. (NASDAQ:ZI). Shannon River Fund Management has a $50.2 million position in the stock, comprising 6% of its 13F portfolio. The second most bullish fund manager is Lomas Capital Management, managed by Daniel Lascano, which holds a $39 million position; 6.4% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Anand Parekh’s Alyeska Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and David Costen Haley’s HBK Investments. In terms of the portfolio weights assigned to each position Lomas Capital Management allocated the biggest weight to ZoomInfo Technologies Inc. (NASDAQ:ZI), around 6.38% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, designating 6.04 percent of its 13F equity portfolio to ZI.
Seeing as ZoomInfo Technologies Inc. (NASDAQ:ZI) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Alex Sacerdote’s Whale Rock Capital Management dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $15.5 million in stock. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also dropped its stock, about $6.5 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to ZoomInfo Technologies Inc. (NASDAQ:ZI). These stocks are Domino’s Pizza, Inc. (NYSE:DPZ), Tractor Supply Company (NASDAQ:TSCO), Fox Corporation (NASDAQ:FOXA), iQIYI, Inc. (NASDAQ:IQ), BioNTech SE (NASDAQ:BNTX), ORIX Corporation (NYSE:IX), and MPLX LP (NYSE:MPLX). This group of stocks’ market values are closest to ZI’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 24 hedge funds with bullish positions and the average amount invested in these stocks was $876 million. That figure was $188 million in ZI’s case. Tractor Supply Company (NASDAQ:TSCO) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. ZoomInfo Technologies Inc. (NASDAQ:ZI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZI is 51. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ZI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ZI investors were disappointed as the stock returned -2% since the end of September (through 12/14) 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.