At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Zimmer Biomet Holdings Inc (NYSE:ZBH) has seen an increase in hedge fund sentiment in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Valero Energy Corporation (NYSE:VLO), Consolidated Edison, Inc. (NYSE:ED), and Public Service Enterprise Group Inc. (NYSE:PEG) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, let’s take a glance at the recent action surrounding Zimmer Biomet Holdings Inc (NYSE:ZBH).
Hedge fund activity in Zimmer Biomet Holdings Inc (NYSE:ZBH)
At the end of the third quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D. E. Shaw’s D E Shaw has the largest position in Zimmer Biomet Holdings Inc (NYSE:ZBH), worth close to $140.7 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Healthcor Management LP, led by Arthur B Cohen and Joseph Healey, holding a $136.5 million position; 8.3% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, John W. Rogers’ Ariel Investments and Ken Griffin’s Citadel Investment Group.
Now, key money managers were breaking ground themselves. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Zimmer Biomet Holdings Inc (NYSE:ZBH). Polar Capital had $24.1 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also made a $16.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Leighton Welch’s Welch Capital Partners, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks similar to Zimmer Biomet Holdings Inc (NYSE:ZBH). These stocks are Valero Energy Corporation (NYSE:VLO), Consolidated Edison, Inc. (NYSE:ED), Public Service Enterprise Group Inc. (NYSE:PEG), and Zoetis Inc (NYSE:ZTS). This group of stocks’ market valuations match ZBH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.05 billion. That figure was $1.54 billion in ZBH’s case. Zoetis Inc (NYSE:ZTS) is the most popular stock in this table. On the other hand Public Service Enterprise Group Inc. (NYSE:PEG) is the least popular one with only 20 bullish hedge fund positions. Zimmer Biomet Holdings Inc (NYSE:ZBH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ZTS might be a better candidate to consider a long position.