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Did Hedge Funds Make The Right Call On UFP Industries, Inc. (UFPI) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded UFP Industries, Inc. (NASDAQ:UFPI) and determine whether the smart money was really smart about this stock.

UFP Industries, Inc. (NASDAQ:UFPI) investors should be aware of a decrease in support from the world’s most elite money managers recently. Our calculations also showed that UFPI 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a look at the latest hedge fund action regarding UFP Industries, Inc. (NASDAQ:UFPI).

Hedge fund activity in UFP Industries, Inc. (NASDAQ:UFPI)

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -37% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in UFPI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in UFP Industries, Inc. (NASDAQ:UFPI). Arrowstreet Capital has a $12.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $10.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to UFP Industries, Inc. (NASDAQ:UFPI), around 1.07% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.22 percent of its 13F equity portfolio to UFPI.

Since UFP Industries, Inc. (NASDAQ:UFPI) has faced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, Richard Driehaus’s Driehaus Capital dumped the biggest position of all the hedgies followed by Insider Monkey, comprising close to $2.2 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to UFP Industries, Inc. (NASDAQ:UFPI). We will take a look at NCR Corporation (NYSE:NCR), BlackBerry Limited (NYSE:BB), Tempur Sealy International Inc. (NYSE:TPX), and J&J Snack Foods Corp. (NASDAQ:JJSF). This group of stocks’ market values are closest to UFPI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NCR 32 155675 0
BB 22 280349 -5
TPX 38 501858 -4
JJSF 17 83077 4
Average 27.25 255240 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $67 million in UFPI’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks UFP Industries, Inc. (NASDAQ:UFPI) is even less popular than JJSF. Hedge funds clearly dropped the ball on UFPI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on UFPI as the stock returned 55.6% since the end of March and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.