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Did Hedge Funds Make The Right Call On United Therapeutics Corporation (UTHR) ?

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 United Therapeutics Corporation (NASDAQ:UTHR) and determine whether the smart money was really smart about this stock.

United Therapeutics Corporation (NASDAQ:UTHR) was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. UTHR investors should be aware of a decrease in support from the world’s most elite money managers recently. There were 36 hedge funds in our database with UTHR holdings at the end of the previous quarter. Our calculations also showed that UTHR 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.
TUDOR INVESTMENT CORP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to take a peek at the key hedge fund action encompassing United Therapeutics Corporation (NASDAQ:UTHR).

How have hedgies been trading United Therapeutics Corporation (NASDAQ:UTHR)?

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UTHR over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UTHR A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of United Therapeutics Corporation (NASDAQ:UTHR), with a stake worth $340.4 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $133.2 million. Consonance Capital Management, Adage Capital Management, and Palo Alto Investors 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 Consonance Capital Management allocated the biggest weight to United Therapeutics Corporation (NASDAQ:UTHR), around 9.53% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, setting aside 6.96 percent of its 13F equity portfolio to UTHR.

Judging by the fact that United Therapeutics Corporation (NASDAQ:UTHR) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $48.8 million in stock. Steven Boyd’s fund, Armistice Capital, also said goodbye to its stock, about $11.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to United Therapeutics Corporation (NASDAQ:UTHR). These stocks are Diamondback Energy Inc (NASDAQ:FANG), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), China Biologic Products Holdings Inc (NASDAQ:CBPO), and Gold Fields Limited (NYSE:GFI). All of these stocks’ market caps resemble UTHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FANG 31 240887 -13
LECO 19 157727 3
CBPO 16 612733 -3
GFI 22 244665 4
Average 22 314003 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $314 million. That figure was $1291 million in UTHR’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand China Biologic Products Holdings Inc (NASDAQ:CBPO) is the least popular one with only 16 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on UTHR as the stock returned 27.6% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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