Do Hedge Funds Love Ubiquiti Networks Inc (UBNT)?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Ubiquiti Networks Inc (NASDAQ:UBNT) was in 16 hedge funds’ portfolios at the end of September. UBNT investors should pay attention to an increase in hedge fund sentiment of late. There were 15 hedge funds in our database with UBNT holdings at the end of the previous quarter. Our calculations also showed that UBNT isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

We’re going to take a gander at the key hedge fund action regarding Ubiquiti Networks Inc (NASDAQ:UBNT).

What have hedge funds been doing with Ubiquiti Networks Inc (NASDAQ:UBNT)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in UBNT heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds UBNT Positions

When looking at the institutional investors followed by Insider Monkey, Akre Capital Management, managed by Charles Akre, holds the number one position in Ubiquiti Networks Inc (NASDAQ:UBNT). Akre Capital Management has a $264.9 million position in the stock, comprising 3.1% of its 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $43.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Gregory Bylinsky and Jefferson Gramm’s Bandera Partners, and John Overdeck and David Siegel’s Two Sigma Advisors.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Bandera Partners, managed by Gregory Bylinsky and Jefferson Gramm, created the most outsized position in Ubiquiti Networks Inc (NASDAQ:UBNT). Bandera Partners had $8.6 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $2.3 million position during the quarter. The following funds were also among the new UBNT investors: Joe DiMenna’s ZWEIG DIMENNA PARTNERS and Nick Thakore’s Diametric Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ubiquiti Networks Inc (NASDAQ:UBNT) but similarly valued. We will take a look at Enable Midstream Partners LP (NYSE:ENBL), Carlisle Companies, Inc. (NYSE:CSL), KT Corporation (NYSE:KT), and Western Gas Partners, LP (NYSE:WES). This group of stocks’ market caps are closest to UBNT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENBL 4 12258 1
CSL 22 460444 6
KT 9 184882 0
WES 8 78209 0
Average 10.75 183948 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $337 million in UBNT’s case. Carlisle Companies, Inc. (NYSE:CSL) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. Ubiquiti Networks Inc (NASDAQ:UBNT) 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. In this regard CSL might be a better candidate to consider a long position.

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