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Did Hedge Funds Make The Right Call On Universal Display Corporation (OLED) ?

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 Universal Display Corporation (NASDAQ:OLED) and determine whether the smart money was really smart about this stock.

Universal Display Corporation (NASDAQ:OLED) investors should be aware of a decrease in hedge fund sentiment lately. OLED was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 31 hedge funds in our database with OLED positions at the end of the previous quarter. Our calculations also showed that OLED 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.

In the 21st century investor’s toolkit there are numerous methods investors employ to appraise their holdings. A couple of the most under-the-radar methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite investment managers can trounce the S&P 500 by a superb margin (see the details here).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. 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 if you have any good ideas send us an email. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Universal Display Corporation (NASDAQ:OLED).

How are hedge funds trading Universal Display Corporation (NASDAQ:OLED)?

Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in OLED a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is OLED A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in Universal Display Corporation (NASDAQ:OLED). Renaissance Technologies has a $87.3 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, managed by Anand Parekh, which holds a $41.5 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism contain Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Universal Display Corporation (NASDAQ:OLED), around 1.45% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to OLED.

Seeing as Universal Display Corporation (NASDAQ:OLED) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that slashed their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $7.5 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $6.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Universal Display Corporation (NASDAQ:OLED). We will take a look at PPD, Inc. (NASDAQ:PPD), OGE Energy Corp. (NYSE:OGE), A. O. Smith Corporation (NYSE:AOS), and Ciena Corporation (NASDAQ:CIEN). This group of stocks’ market values are similar to OLED’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPD 27 512293 27
OGE 21 215864 4
AOS 25 363596 -1
CIEN 31 301426 -4
Average 26 348295 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $223 million in OLED’s case. Ciena Corporation (NASDAQ:CIEN) is the most popular stock in this table. On the other hand OGE Energy Corp. (NYSE:OGE) is the least popular one with only 21 bullish hedge fund positions. Universal Display Corporation (NASDAQ:OLED) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately OLED wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); OLED investors were disappointed as the stock returned 13.6% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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