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Should You Avoid Zions Bancorporation, National Association (ZION)?

In this article you are going to find out whether hedge funds think Zions Bancorporation, National Association (NASDAQ:ZION) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Zions Bancorporation, National Association (NASDAQ:ZION) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. ZION was in 33 hedge funds’ portfolios at the end of March. There were 43 hedge funds in our database with ZION positions at the end of the previous quarter. Our calculations also showed that ZION isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Steven Cohen

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action regarding Zions Bancorporation, National Association (NASDAQ:ZION).

How are hedge funds trading Zions Bancorporation, National Association (NASDAQ:ZION)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2019. By comparison, 44 hedge funds held shares or bullish call options in ZION a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Zions Bancorporation, National Association (NASDAQ:ZION), which was worth $15.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $14.3 million worth of shares. Millennium Management, Point72 Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Zions Bancorporation, National Association (NASDAQ:ZION), around 2.35% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 0.64 percent of its 13F equity portfolio to ZION.

Judging by the fact that Zions Bancorporation, National Association (NASDAQ:ZION) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital sold off the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $31.4 million in stock. Highbridge Capital Management, also sold off its stock, about $28.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 10 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Zions Bancorporation, National Association (NASDAQ:ZION). We will take a look at Oshkosh Corporation (NYSE:OSK), Dunkin Brands Group Inc (NASDAQ:DNKN), New York Community Bancorp, Inc. (NYSE:NYCB), and CoreSite Realty Corp (NYSE:COR). This group of stocks’ market values are closest to ZION’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OSK 22 214910 -6
DNKN 34 207067 3
NYCB 22 192830 -5
COR 23 267395 2
Average 25.25 220551 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $113 million in ZION’s case. Dunkin Brands Group Inc (NASDAQ:DNKN) is the most popular stock in this table. On the other hand Oshkosh Corporation (NYSE:OSK) is the least popular one with only 22 bullish hedge fund positions. Zions Bancorporation, National Association (NASDAQ:ZION) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on ZION as the stock returned 24.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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