We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards UniFirst Corp (NYSE:UNF) and determine whether hedge funds skillfully traded this stock.
Is UniFirst Corp (NYSE:UNF) a buy, sell, or hold? Investors who are in the know were taking a pessimistic view. The number of bullish hedge fund bets fell by 4 lately. Our calculations also showed that UNF 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). UNF was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with UNF holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are perceived as unimportant, outdated financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the masters of this group, around 850 funds. It is estimated that this group of investors watch over the majority of all hedge funds’ total capital, and by keeping track of their matchless equity investments, Insider Monkey has revealed a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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. Keeping this in mind we’re going to view the key hedge fund action regarding UniFirst Corp (NYSE:UNF).
What does smart money think about UniFirst Corp (NYSE:UNF)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards UNF over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in UniFirst Corp (NYSE:UNF). Royce & Associates has a $14.9 million position in the stock, comprising 0.2% of its 13F portfolio. On Royce & Associates’s heels is Echo Street Capital Management, managed by Greg Poole, which holds a $12.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Clint Carlson’s Carlson Capital, Panayotis Takis Sparaggis’s Alkeon Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to UniFirst Corp (NYSE:UNF), around 0.42% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, earmarking 0.28 percent of its 13F equity portfolio to UNF.
Seeing as UniFirst Corp (NYSE:UNF) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds who were dropping their entire stakes heading into Q4. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, comprising close to $8.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $1.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to UniFirst Corp (NYSE:UNF). These stocks are Watts Water Technologies Inc (NYSE:WTS), Avista Corp (NYSE:AVA), Hamilton Lane Incorporated (NASDAQ:HLNE), and Companhia Paranaense de Energia (NYSE:ELP). All of these stocks’ market caps resemble UNF’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $76 million in UNF’s case. Watts Water Technologies Inc (NYSE:WTS) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia (NYSE:ELP) is the least popular one with only 7 bullish hedge fund positions. UniFirst Corp (NYSE:UNF) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 but beat the market by 17.1 percentage points. Unfortunately UNF wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UNF were disappointed as the stock returned 21.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.