Is Zimmer Biomet Holdings Inc (ZBH) Going to Burn These Hedge Funds?
Is Zimmer Biomet Holdings Inc (NYSE:ZBH) 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.
Zimmer Biomet Holdings Inc (NYSE:ZBH) investors should be aware of a decrease in support from the world's most elite money managers of late. Zimmer Biomet Holdings Inc (NYSE:ZBH) was in 50 hedge funds' portfolios at the end of March. The all time high for this statistic is 64. Our calculations also showed that ZBH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Arthur B Cohen and Joseph Healey of Healthcor Management LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 view the key hedge fund action surrounding Zimmer Biomet Holdings Inc (NYSE:ZBH).
Do Hedge Funds Think ZBH Is A Good Stock To Buy Now?
At Q1's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in ZBH over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Viking Global held the most valuable stake in Zimmer Biomet Holdings Inc (NYSE:ZBH), which was worth $611.7 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $209.2 million worth of shares. Citadel Investment Group, Healthcor Management LP, and Marshall Wace LLP 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 0 allocated the biggest weight to Zimmer Biomet Holdings Inc (NYSE:ZBH), around 7.53% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 4.3 percent of its 13F equity portfolio to ZBH.
Due to the fact that Zimmer Biomet Holdings Inc (NYSE:ZBH) has witnessed declining sentiment from hedge fund managers, it's safe to say that there exists a select few fund managers that slashed their full holdings heading into Q2. Intriguingly, Renaissance Technologies sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, totaling close to $6 million in stock. Gregg J. Powers's fund, Private Capital Management, also said goodbye to its stock, about $4.7 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds heading into Q2.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Zimmer Biomet Holdings Inc (NYSE:ZBH) but similarly valued. These stocks are Peloton Interactive, Inc. (NASDAQ:PTON), Marvell Technology, Inc. (NASDAQ:MRVL), Orange SA (NYSE:ORAN), The Hershey Company (NYSE:HSY), Wayfair Inc (NYSE:W), Yum! Brands, Inc. (NYSE:YUM), and Stanley Black & Decker, Inc. (NYSE:SWK). All of these stocks' market caps resemble ZBH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTON,64,3963327,1 MRVL,33,683159,-7 ORAN,2,10613,-1 HSY,42,1267940,3 W,37,4012752,-3 YUM,32,751481,-1 SWK,33,993045,-5 Average,34.7,1668902,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1669 million. That figure was $2151 million in ZBH's case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Zimmer Biomet Holdings Inc (NYSE:ZBH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZBH is 64.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately ZBH wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ZBH were disappointed as the stock returned -1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
