Were Hedge Funds Right About Betting On Zynga Inc (ZNGA)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Zynga Inc (NASDAQ:ZNGA) based on that data.

Is Zynga Inc (NASDAQ:ZNGA) a buy here? Prominent investors were turning bullish. The number of bullish hedge fund positions inched up by 4 recently. Zynga Inc (NASDAQ:ZNGA) was in 52 hedge funds’ portfolios at the end of December. The all time high for this statistic is 59. Our calculations also showed that ZNGA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 48 hedge funds in our database with ZNGA positions at the end of the third quarter.

In the eyes of most traders, hedge funds are assumed to be worthless, old financial vehicles of the past. While there are more than 8000 funds trading at present, Our experts choose to focus on the moguls of this club, around 850 funds. These investment experts have their hands on the lion’s share of the smart money’s total capital, and by paying attention to their matchless investments, Insider Monkey has deciphered many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. 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 homepage. Keeping this in mind we’re going to take a look at the key hedge fund action regarding Zynga Inc (NASDAQ:ZNGA).

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

At Q4’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ZNGA over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cadian Capital held the most valuable stake in Zynga Inc (NASDAQ:ZNGA), which was worth $224 million at the end of the fourth quarter. On the second spot was Iridian Asset Management which amassed $184.7 million worth of shares. Millennium Management, Newbrook Capital Advisors, and Parsifal Capital 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 Tiger Legatus Capital allocated the biggest weight to Zynga Inc (NASDAQ:ZNGA), around 22.31% of its 13F portfolio. Shelter Haven Capital Management is also relatively very bullish on the stock, designating 11.3 percent of its 13F equity portfolio to ZNGA.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Zynga Inc (NASDAQ:ZNGA) but similarly valued. These stocks are News Corp (NASDAQ:NWSA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Cna Financial Corporation (NYSE:CNA), News Corp (NASDAQ:NWS), Lennox International Inc. (NYSE:LII), Repligen Corporation (NASDAQ:RGEN), and First Solar, Inc. (NASDAQ:FSLR). All of these stocks’ market caps are similar to ZNGA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWSA 32 703034 1
TEVA 26 916076 -7
CNA 16 60793 -1
NWS 11 65562 -3
LII 27 353035 -7
RGEN 37 1330745 2
FSLR 34 406430 -6
Average 26.1 547954 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $548 million. That figure was $1003 million in ZNGA’s case. Repligen Corporation (NASDAQ:RGEN) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Zynga Inc (NASDAQ:ZNGA) is more popular among hedge funds. Our overall hedge fund sentiment score for ZNGA is 85.4. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately ZNGA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ZNGA were disappointed as the stock returned 9.6% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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