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ZIOPHARM Oncology Inc. (ZIOP): Are Hedge Funds Right About This Stock?

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 ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) based on that data and determine whether they were really smart about the stock.

Is ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) a bargain? Investors who are in the know were selling. The number of bullish hedge fund bets were cut by 1 lately. Our calculations also showed that ZIOP 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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 8 states that allow euthanasia to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing ZIOPHARM Oncology Inc. (NASDAQ:ZIOP).

What have hedge funds been doing with ZIOPHARM Oncology Inc. (NASDAQ:ZIOP)?

Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in ZIOP a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is ZIOP A Good Stock To Buy?

The largest stake in ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) was held by MSDC Management, which reported holding $37.1 million worth of stock at the end of September. It was followed by Miller Value Partners with a $31.5 million position. Other investors bullish on the company included Discovery Capital Management, EcoR1 Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), around 10.04% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, designating 6.43 percent of its 13F equity portfolio to ZIOP.

Since ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their entire stakes last quarter. Intriguingly, D. E. Shaw’s D E Shaw dropped the largest position of the “upper crust” of funds watched by Insider Monkey, worth about $0.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $0.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to ZIOPHARM Oncology Inc. (NASDAQ:ZIOP). These stocks are TPI Composites, Inc. (NASDAQ:TPIC), ARMOUR Residential REIT, Inc. (NYSE:ARR), Niu Technologies (NASDAQ:NIU), and Conduent Incorporated (NYSE:CNDT). This group of stocks’ market caps resemble ZIOP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TPIC 13 47510 -7
ARR 10 15497 -1
NIU 5 31244 0
CNDT 18 167125 -8
Average 11.5 65344 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $105 million in ZIOP’s case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 5 bullish hedge fund positions. ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ZIOP as the stock returned 51.4% in Q2 (through June 25th) 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.