Is ZNTL A Good Stock To Buy Now?

At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) makes for a good investment right now.

Is ZNTL a good stock to buy now? Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 11 hedge funds in our database with ZNTL positions at the end of the second quarter. Our calculations also showed that ZNTL 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).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

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. Keeping this in mind let’s take a look at the new hedge fund action surrounding Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL).

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

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in ZNTL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) was held by Viking Global, which reported holding $145.3 million worth of stock at the end of September. It was followed by Matrix Capital Management with a $124.9 million position. Other investors bullish on the company included Tybourne Capital Management, Redmile Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Tybourne Capital Management allocated the biggest weight to Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), around 2.15% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, dishing out 1.66 percent of its 13F equity portfolio to ZNTL.

As industrywide interest jumped, some big names have jumped into Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, initiated the most valuable position in Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL). Polar Capital had $8.8 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also initiated a $6.4 million position during the quarter. The other funds with new positions in the stock are Matthew Halbower’s Pentwater Capital Management and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL). We will take a look at Whiting Petroleum Corporation (NYSE:WLL), Magnolia Oil & Gas Corporation (NYSE:MGY), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Broadmark Realty Capital Inc. (NYSE:BRMK), Mesa Laboratories, Inc. (NASDAQ:MLAB), Nurix Therapeutics, Inc. (NASDAQ:NRIX), and Weis Markets, Inc. (NYSE:WMK). This group of stocks’ market values are similar to ZNTL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WLL 18 131921 12
MGY 19 87213 -1
CORE 20 45034 5
BRMK 11 85821 3
MLAB 8 104292 -6
NRIX 12 249630 12
WMK 15 46048 -4
Average 14.7 107137 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $600 million in ZNTL’s case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Mesa Laboratories, Inc. (NASDAQ:MLAB) is the least popular one with only 8 bullish hedge fund positions. Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZNTL is 63. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ZNTL as the stock returned 77.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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