In this article we will check out the progression of hedge fund sentiment towards ZTO Express (Cayman) Inc. (NYSE:ZTO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is ZTO a good stock to buy now? Hedge funds were buying. The number of bullish hedge fund bets inched up by 4 recently. ZTO Express (Cayman) Inc. (NYSE:ZTO) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that ZTO 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.
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. Now let’s review the new hedge fund action encompassing ZTO Express (Cayman) Inc. (NYSE:ZTO).
Do Hedge Funds Think ZTO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ZTO over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Platinum Asset Management, managed by Kerr Neilson, holds the most valuable position in ZTO Express (Cayman) Inc. (NYSE:ZTO). Platinum Asset Management has a $204.8 million position in the stock, comprising 5.1% of its 13F portfolio. Sitting at the No. 2 spot is Hillhouse Capital Management, managed by Lei Zhang, which holds a $100.1 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Renaissance Technologies, Larry Chen and Terry Zhang’s Tairen Capital and Ray Dalio’s Bridgewater Associates. In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to ZTO Express (Cayman) Inc. (NYSE:ZTO), around 5.07% of its 13F portfolio. Tairen Capital is also relatively very bullish on the stock, designating 3.7 percent of its 13F equity portfolio to ZTO.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in ZTO Express (Cayman) Inc. (NYSE:ZTO). Marshall Wace LLP had $17.4 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also made a $13.8 million investment in the stock during the quarter. The other funds with brand new ZTO positions are Leung Chi Kit’s Kadensa Capital, Matthew L Pinz’s Pinz Capital, and Jonathan Lourie and Stuart Fiertz’s Cheyne Capital.
Let’s go over hedge fund activity in other stocks similar to ZTO Express (Cayman) Inc. (NYSE:ZTO). We will take a look at Sirius XM Holdings Inc (NASDAQ:SIRI), Church & Dwight Co., Inc. (NYSE:CHD), Mettler-Toledo International Inc. (NYSE:MTD), Zillow Group Inc (NASDAQ:Z), Lloyds Banking Group PLC (NYSE:LYG), XP Inc. (NASDAQ:XP), and Welltower Inc. (NYSE:WELL). All of these stocks’ market caps are similar to ZTO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIRI | 37 | 748381 | -5 |
| CHD | 36 | 549977 | 3 |
| MTD | 30 | 603316 | 3 |
| Z | 69 | 3716280 | 10 |
| LYG | 5 | 3478 | -2 |
| XP | 20 | 448147 | -1 |
| WELL | 25 | 603202 | -2 |
| Average | 31.7 | 953254 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $953 million. That figure was $500 million in ZTO’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. ZTO Express (Cayman) Inc. (NYSE:ZTO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZTO is 49.8. 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 ZTO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ZTO investors were disappointed as the stock returned -9.8% 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.
