Is Domtar Corp (USA) (NYSE:UFS) undervalued? Money managers are becoming more confident. The number of bullish hedge fund positions rose by 3 in recent months.
To the average investor, there are many methods shareholders can use to track the equity markets. A couple of the most useful are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the elite investment managers can outperform their index-focused peers by a healthy amount (see just how much).
Just as key, bullish insider trading sentiment is a second way to parse down the stock market universe. Obviously, there are a number of reasons for an insider to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this strategy if shareholders understand where to look (learn more here).
Now, let’s take a gander at the recent action encompassing Domtar Corp (USA) (NYSE:UFS).
What have hedge funds been doing with Domtar Corp (USA) (NYSE:UFS)?
At the end of the first quarter, a total of 26 of the hedge funds we track were bullish in this stock, a change of 13% from the first quarter. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly.
Of the funds we track, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the biggest position in Domtar Corp (USA) (NYSE:UFS). Scopia Capital has a $54.7 million position in the stock, comprising 1.9% of its 13F portfolio. The second largest stake is held by Jeffrey Gates of Gates Capital Management, with a $48.6 million position; 2.6% of its 13F portfolio is allocated to the stock. Other peers with similar optimism include John Burbank’s Passport Capital, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital and Cliff Asness’s AQR Capital Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Dreman Value Management, managed by David Dreman, created the largest position in Domtar Corp (USA) (NYSE:UFS). Dreman Value Management had 3.3 million invested in the company at the end of the quarter. Nick Niell’s Arrowgrass Capital Partners also made a $2.3 million investment in the stock during the quarter. The other funds with brand new UFS positions are Matthew Hulsizer’s PEAK6 Capital Management, Ray Dalio’s Bridgewater Associates, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
How are insiders trading Domtar Corp (USA) (NYSE:UFS)?
Insider buying is at its handiest when the company in focus has seen transactions within the past 180 days. Over the latest six-month time frame, Domtar Corp (USA) (NYSE:UFS) has experienced 1 unique insiders buying, and 4 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to Domtar Corp (USA) (NYSE:UFS). These stocks are Schweitzer-Mauduit International, Inc. (NYSE:SWM), KapStone Paper and Packaging Corp. (NYSE:KS), Resolute Forest Products Inc (NYSE:RFP), and Fibria Celulose SA (ADR) (NYSE:FBR). All of these stocks are in the paper & paper products industry and their market caps are closest to UFS’s market cap.