Zoetis Inc (ZTS) Fell Out Of Favor With Hedge Funds?

Is Zoetis Inc (NYSE:ZTS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Hedge fund interest in Zoetis Inc (NYSE:ZTS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ZTS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare ZTS to other stocks including BP plc (NYSE:BP), Snowflake Inc (NYSE:SNOW), and Anthem Inc (NYSE:ANTM) to get a better sense of its popularity.

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 let’s take a gander at the key hedge fund action encompassing Zoetis Inc (NYSE:ZTS).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

At third quarter’s end, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards ZTS over the last 25 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Cantillon Capital Management held the most valuable stake in Zoetis Inc (NYSE:ZTS), which was worth $428.4 million at the end of the third quarter. On the second spot was Ako Capital which amassed $418.6 million worth of shares. Arrowstreet Capital, Intermede Investment Partners, and Renaissance Technologies 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 Bristol Gate Capital Partners allocated the biggest weight to Zoetis Inc (NYSE:ZTS), around 5.28% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, setting aside 4.84 percent of its 13F equity portfolio to ZTS.

Since Zoetis Inc (NYSE:ZTS) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that elected to cut their entire stakes last quarter. Interestingly, Ryan Caldwell’s Chiron Investment Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $19 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund cut about $3.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Zoetis Inc (NYSE:ZTS). These stocks are BP plc (NYSE:BP), Snowflake Inc (NYSE:SNOW), Anthem Inc (NYSE:ANTM), ConocoPhillips (NYSE:COP), Analog Devices, Inc. (NASDAQ:ADI), U.S. Bancorp (NYSE:USB), and Gilead Sciences, Inc. (NASDAQ:GILD). This group of stocks’ market caps resemble ZTS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BP 29 1053236 -1
SNOW 73 14569929 3
ANTM 59 4585560 -8
COP 49 1371142 -1
ADI 74 5698767 12
USB 42 8390873 1
GILD 55 1751615 1
Average 54.4 5345875 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.4 hedge funds with bullish positions and the average amount invested in these stocks was $5346 million. That figure was $2713 million in ZTS’s case. Analog Devices, Inc. (NASDAQ:ADI) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 29 bullish hedge fund positions. Zoetis Inc (NYSE:ZTS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZTS is 65.7. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on ZTS as the stock returned 14.5% since the end of Q3 (through 11/30) 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.