Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Zosano Pharma Corp (NASDAQ:ZSAN) to find out whether there were any major changes in hedge funds’ views.
Is Zosano Pharma (ZSAN) a good stock to buy now? ZSAN has seen an increase in hedge fund sentiment lately. Zosano Pharma Corp (NASDAQ:ZSAN) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 9. There were 3 hedge funds in our database with ZSAN positions at the end of the second quarter. Our calculations also showed that ZSAN 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 we’re going to take a glance at the latest hedge fund action encompassing Zosano Pharma Corp (NASDAQ:ZSAN).
How have hedgies been trading Zosano Pharma Corp (NASDAQ:ZSAN)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ZSAN over the last 21 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Zosano Pharma Corp (NASDAQ:ZSAN) was held by Adage Capital Management, which reported holding $1.6 million worth of stock at the end of September. It was followed by Sio Capital with a $0.7 million position. Other investors bullish on the company included Alyeska Investment Group, Renaissance Technologies, and Winton Capital Management. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Zosano Pharma Corp (NASDAQ:ZSAN), around 0.15% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to ZSAN.
Now, some big names were breaking ground themselves. Sio Capital, managed by Michael Castor, assembled the most valuable position in Zosano Pharma Corp (NASDAQ:ZSAN). Sio Capital had $0.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.4 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Zosano Pharma Corp (NASDAQ:ZSAN) but similarly valued. These stocks are Chimerix Inc (NASDAQ:CMRX), Central Valley Community Bancorp (NASDAQ:CVCY), Smith Micro Software, Inc. (NASDAQ:SMSI), Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), Ames National Corporation (NASDAQ:ATLO), Steel Partners Holdings LP (NYSE:SPLP), and VolitionRX Limited (NYSE:VNRX). All of these stocks’ market caps match ZSAN’s market cap.
|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 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $3 million in ZSAN’s case. Chimerix Inc (NASDAQ:CMRX) is the most popular stock in this table. On the other hand VolitionRX Limited (NYSE:VNRX) is the least popular one with only 2 bullish hedge fund positions. Zosano Pharma Corp (NASDAQ:ZSAN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZSAN is 36.2. 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately ZSAN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ZSAN investors were disappointed as the stock returned -60.1% since the end of September (through 11/27) 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.