Is Zoetis Inc (ZTS) a good stock to buy?
In this article, we’ll use hedge fund sentiment as a tool and determine if Zoetis Inc (NYSE:ZTS) is a good investment right now. We like to analyze hedge fund sentiment before conducting in-depth research days. We do this because hedge funds and other elite investors have many Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is no dearth of articles on hedge fund investment failure and it is a fact that hedge fund picks don’t beat the market 100% of the time, but their consensus picks have historically been very performed well and outperformed the market after adjusting for risk.
Is ZTS a good stock to buy? Interest of hedge funds in Zoetis Inc (NYSE:ZTS) shares was stable at the end of the last quarter. This is usually a negative indicator. Our calculations also showed that ZTS is not one of the 30 most popular stocks among hedge funds (click for Q2 ranking). At the end of this article, we’ll also be comparing ZTS to other stocks, including Prologis Inc (NYSE:PLD), Altria Group Inc (NYSE:MO) and Fidelity National Information Services Inc. (NYSE:FIS) to get a better idea of its popularity.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Hedge funds have over $ 3.5 trillion in assets under management, so you can’t expect all of their portfolios to beat the market with significant margins. Our research identified in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 79 percentage points since March 2017 (see details here). So you can still find a lot of gems by following the movements of hedge funds today.
William Von Mueffling of Cantillon Capital Management
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Do hedge funds think ZTS is a good stock to buy now?
At the end of the second quarter, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below shows the number of hedge funds with a bullish position in ZTS over the past 24 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.
Looking at institutional investors followed by Insider Monkey, Nicolai Tangen’s 0 holds the largest position in Zoetis Inc (NYSE: ZTS), worth nearly $ 453.3 million, corresponding to 5 , 1% of its total portfolio 13F. The second most optimistic fund manager is 0, led by William von Mueffling, who has a position of $ 418.1 million; 2.8% of its 13F portfolio is allocated to securities. Other bullish peers include the 0 from Barry Dargan, the 0 from Paul Marshall and Ian Wace, and the 0 from Peter Rathjens, Bruce Clarke and John Campbell. In terms of portfolio weight assigned to each position Capital of Ako assigned the greatest weight to Zoetis Inc (NYSE: ZTS), around 5.11% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, assigning 5.05% of its 13F equity portfolio to ZTS.
Judging by the fact that Zoetis Inc (NYSE: ZTS) experienced bearish sentiment from hedge fund managers, it’s safe to say that a specific group of hedge funds sold their positions entirely in the second quarter. Curiously, Dmitry Balyasny’s Balyasny asset management dropped the biggest investment of all hedges, followed by Insider Monkey, comprising around $ 112.6 million in shares, and Terry Smith’s Fundsmith Long / Short fund was right behind that move, with the fund dropping around 4 , $ 6 million. These bearish behaviors are important to note, as the overall hedge fund interest has remained the same (this is a bearish signal in our experience).
Now let’s take a look at the activity of hedge funds in other stocks similar to Zoetis Inc (NYSE: ZTS). We’ll take a look at Prologis Inc (NYSE:PLD), Altria Group Inc (NYSE:MO), Fidelity National Information Services Inc. (NYSE:FIS), Mondelez International Inc (NASDAQ:MDLZ), NIO Inc. (NYSE:NIO), Gilead Sciences, Inc. (NASDAQ:BROWN) and General Motors Company (NYSE:DG). The market valuations of this group of shares are similar to the market valuation of ZTS.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of position HF PLD, 40.563748.1 MO, 47.948996.9 FIS, 72.7369909, -2 MDLZ, 53.2946868.8 NIO, 34 2066911.6 GILD, 54.1732734, -11 GM, 86.7414862.0 Average, 55.1.3292004,1.6 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 55.1 hedge funds with bullish positions and the average amount invested in these stocks was $ 3,292 million. That figure was $ 2,706 million in the case of ZTS. General Motors Company (NYSE:DG) is the most popular action in this table. On the other hand, NIO Inc. (NYSE:NIO) is the least popular with only 34 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 56.6. Stocks with a 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 have shown 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 25.7% in 2021 through September 27 and have consistently beaten the market by 6.2 percentage points. Hedge funds were also right to bet on ZTS, as the stock has returned 6.3% since the end of the second quarter (through 9/27) and has outperformed the market. Hedge funds have been rewarded for their relative optimism.
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Disclosure: none. This article originally appeared on Monkey initiate.