Were Hedge Funds Right About Souring On Zions Bancorporation (ZION)?

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 first 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 4.5 years and analyze what the smart money thinks of Zions Bancorporation, National Association (NASDAQ:ZION) based on that data and determine whether they were really smart about the stock.

Zions Bancorporation, National Association (NASDAQ:ZION) has seen a decrease in hedge fund sentiment of late. ZION was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

Keeping this in mind let’s take a look at the new hedge fund action encompassing Zions Bancorporation, National Association (NASDAQ:ZION).

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

Heading into the second quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ZION over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Zions Bancorporation, National Association (NASDAQ:ZION), with a stake worth $15.3 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $14.3 million. 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.

Since Zions Bancorporation, National Association (NASDAQ:ZION) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers that decided to sell off their entire stakes in the first quarter. At the top of the heap, Clint Carlson’s Carlson Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $31.4 million in stock. Highbridge Capital Management, also dropped its stock, about $28.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 10 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Zions Bancorporation, National Association (NASDAQ:ZION) but similarly valued. 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). All of these stocks’ market caps are closest to ZION’s market cap.

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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ZION as the stock returned 28.5% in Q2 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.