Were Expert Investors Right About Zebra Technologies Corporation (ZBRA)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Zebra Technologies Corporation (NASDAQ:ZBRA) and determine whether hedge funds had an edge regarding this stock.

Zebra Technologies Corporation (NASDAQ:ZBRA) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Zebra Technologies Corporation (NASDAQ:ZBRA) was in 39 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that ZBRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind we’re going to take a gander at the latest hedge fund action surrounding Zebra Technologies Corporation (NASDAQ:ZBRA).

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

At the end of September, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZBRA over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Andy Brown’s Cedar Rock Capital has the most valuable position in Zebra Technologies Corporation (NASDAQ:ZBRA), worth close to $560.1 million, accounting for 13.4% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $220.1 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Cliff Asness’s AQR Capital Management, Edward Goodnow’s Goodnow Investment Group and Thomas Bancroft’s Makaira Partners. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Zebra Technologies Corporation (NASDAQ:ZBRA), around 13.42% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, setting aside 11.75 percent of its 13F equity portfolio to ZBRA.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, established the most valuable position in Zebra Technologies Corporation (NASDAQ:ZBRA). Holocene Advisors had $48.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $9.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Jinghua Yan’s TwinBeech Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s check out hedge fund activity in other stocks similar to Zebra Technologies Corporation (NASDAQ:ZBRA). We will take a look at PACCAR Inc (NASDAQ:PCAR), Delta Air Lines, Inc. (NYSE:DAL), Skyworks Solutions Inc (NASDAQ:SWKS), Bill.com Holdings, Inc. (NYSE:BILL), Li Auto Inc. (NASDAQ:LI), Laboratory Corp. of America Holdings (NYSE:LH), and UiPath Inc. (NYSE:PATH). This group of stocks’ market caps match ZBRA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $1941 million. That figure was $1305 million in ZBRA’s case. Bill.com Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Li Auto Inc. (NASDAQ:LI) is the least popular one with only 20 bullish hedge fund positions. Zebra Technologies Corporation (NASDAQ:ZBRA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ZBRA is 57.7. 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 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 surpassed the market again by 3.6 percentage points. Unfortunately, ZBRA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ZBRA investors were disappointed as the stock returned -1.2% 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.