Should You Keep Your Trust in Zoom Video Communications (ZM)?

Horos Asset Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. Since the inception of Horos (May 21, 2018), Horos Value Internacional has returned 22.3%, below the 55.2% gain of its benchmark, while Horos Value Iberia has returned 8.1%, outperforming the 0.5% return of its index. Moreover, since 2012, the returns of this management team stand at 199% for the international strategy and 167% for the Iberian strategy, compared to 219% and 67% in their benchmark indices, respectively.  Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Horos Asset Management mentioned Zoom Video Communications, Inc. (NASDAQ:ZM) and explained its insights for the company. Founded in 2011, Zoom Video Communications, Inc. (NASDAQ:ZM) is a Santa Clara, California-based communications technology company with a $34.5 billion market capitalization. Zoom Video Communications, Inc. (NASDAQ:ZM) delivered a -34.85% return since the beginning of the year, while its 12-month returns are down by -69.19%. The stock closed at $119.82 per share on June 27, 2022.

Here is what Horos Asset Management has to say about Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2022 investor letter:

“What about the other asset class that has attracted the most attention from the investment community in recent times? Here we can distinguish three major groups. First, those companies without earnings that had convinced investors of their great future growth prospects, pushing up their valuations to irrational levels. A clear example of this, which we mentioned almost two years ago (see here) is Zoom Video Communications (“Zoom”), whose market cap exceeded that of companies such as IBM or came close to that of Cisco Systems. Well, from the time we wrote about this odd situation until today, Zoom shares have collapsed nearly 80%.

Therefore, if interest rates rise (or are expected to rise), company valuations are negatively impacted. This is especially true for those businesses that generate little cash today and the market expects them to generate a lot of cash in the future. Hence the severe losses in companies that promised a lot of cash generation in the future (such as Zoom).”

Our calculations show that Zoom Video Communications, Inc. (NASDAQ:ZM) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Zoom Video Communications, Inc. (NASDAQ:ZM) was in 43 hedge fund portfolios at the end of the first quarter of 2022, compared to 48 funds in the previous quarter. Zoom Video Communications, Inc. (NASDAQ:ZM) delivered a 2.02% return in the past 3 months.

In June 2022, we also shared another hedge fund’s views on Zoom Video Communications, Inc. (NASDAQ:ZM) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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