Zynga Inc (NASDAQ:ZNGA) has experienced an increase in activity from the world’s largest hedge funds lately. This is important to note, because on the whole, Zynga has had a particularly amazing 2013, returning more than 50% already this year. With this in mind, it’s clear that the smart money has been correct so far, but it’s worth taking a deeper look at the situation. Let’s get started, shall we?
Credit: Zynga Inc (NASDAQ:ZNGA)
If you’d ask most shareholders, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are over 8000 funds trading at the moment, we look at the upper echelon of this group, around 450 funds. It is widely believed that this group controls the lion’s share of all hedge funds’ total capital, and by keeping an eye on their best picks, we have uncovered a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as important, optimistic insider trading activity is another way to parse down the marketplace. As the old adage goes: there are a number of motivations for a corporate insider to sell shares of his or her company, but just one, very obvious reason why they would buy. Many academic studies have demonstrated the useful potential of this strategy if shareholders understand where to look (learn more here).
With these “truths” under our belt, we’re going to take a glance at the latest action surrounding Zynga Inc (NASDAQ:ZNGA).
What have hedge funds been doing with Zynga Inc (NASDAQ:ZNGA)?
At year’s end, a total of 16 of the hedge funds we track held long positions in this stock, a change of 14% from the third quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially.
When looking at the hedgies we track, Patrick McCormack’s Tiger Consumer Management had the most valuable position in Zynga Inc (NASDAQ:ZNGA), worth close to $10 million, accounting for 0.5% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $10 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include D. E. Shaw’s D E Shaw, Paul Tudor Jones’s Tudor Investment Corp and Tony Chedraoui’s Tyrus Capital.
Now, key money managers have jumped into Zynga Inc (NASDAQ:ZNGA) headfirst. Tiger Consumer Management, managed by Patrick McCormack, assembled the most outsized position in Zynga Inc (NASDAQ:ZNGA). Tiger Consumer Management had 10 million invested in the company at the end of the quarter. Tony Chedraoui’s Tyrus Capital also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
How are insiders trading Zynga Inc (NASDAQ:ZNGA)?
Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past six months. Over the last half-year time period, Zynga Inc (NASDAQ:ZNGA) has seen 1 unique insiders purchasing, and 9 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Zynga Inc (NASDAQ:ZNGA). These stocks are Sohu.com Inc (NASDAQ:SOHU), ValueClick Inc (NASDAQ:VCLK), AOL, Inc. (NYSE:AOL), Youku Tudou Inc (ADR) (NYSE:YOKU), and HomeAway, Inc. (NASDAQ:AWAY). All of these stocks are in the internet information providers industry and their market caps are similar to ZNGA’s market cap.