Was The Smart Money Right About Zoom Video Communications, Inc. (ZM)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Zoom Video Communications, Inc. (NASDAQ:ZM) and determine whether the smart money was really smart about this stock.

Is Zoom Video Communications, Inc. (NASDAQ:ZM) a buy, sell, or hold? Money managers were getting less bullish. The number of long hedge fund positions dropped by 3 in recent months. Zoom Video Communications, Inc. (NASDAQ:ZM) was in 56 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 59. Our calculations also showed that ZM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 59 hedge funds in our database with ZM holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a glance at the new hedge fund action encompassing Zoom Video Communications, Inc. (NASDAQ:ZM).

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

At the end of September, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards ZM over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Tiger Global Management LLC was the largest shareholder of Zoom Video Communications, Inc. (NASDAQ:ZM), with a stake worth $1246 million reported as of the end of September. Trailing Tiger Global Management LLC was ARK Investment Management, which amassed a stake valued at $1155.4 million. Renaissance Technologies, Citadel Investment Group, and Coatue Management 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 Jeneq Management allocated the biggest weight to Zoom Video Communications, Inc. (NASDAQ:ZM), around 5.38% of its 13F portfolio. Abdiel Capital Advisors is also relatively very bullish on the stock, dishing out 4.41 percent of its 13F equity portfolio to ZM.

Judging by the fact that Zoom Video Communications, Inc. (NASDAQ:ZM) has experienced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of hedgies who sold off their entire stakes last quarter. Interestingly, Lei Zhang’s Hillhouse Capital Management sold off the largest position of the 750 funds monitored by Insider Monkey, worth an estimated $397.6 million in stock. Josh Resnick’s fund, Jericho Capital Asset Management, also dumped its stock, about $202.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Zoom Video Communications, Inc. (NASDAQ:ZM). We will take a look at Marsh & McLennan Companies, Inc. (NYSE:MMC), General Motors Company (NYSE:GM), Fidelity National Information Services Inc. (NYSE:FIS), Duke Energy Corporation (NYSE:DUK), Crown Castle International Corp. (NYSE:CCI), Chubb Limited (NYSE:CB), and The Bank of Nova Scotia (NYSE:BNS). All of these stocks’ market caps are closest to ZM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $2670 million. That figure was $6004 million in ZM’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 17 bullish hedge fund positions. Zoom Video Communications, Inc. (NASDAQ:ZM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZM 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, ZM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ZM were disappointed as the stock returned -41% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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