Hedge Fund Sentiment Is Stagnant On Universal Stainless & Alloy Products, Inc. (USAP)

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP).

Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that USAP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Research Frontiers, Inc. (NASDAQ:REFR), Trinity Biotech plc (NASDAQ:TRIB), and Pingtan Marine Enterprise Ltd. (NASDAQ:PME) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP).

Do Hedge Funds Think USAP Is A Good Stock To Buy Now?

At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in USAP over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) was held by Royce & Associates, which reported holding $8.1 million worth of stock at the end of December. It was followed by Minerva Advisors with a $4.9 million position. Other investors bullish on the company included Renaissance Technologies, Forest Hill Capital, and Invenomic Capital Management. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP), around 2.69% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to USAP.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) but similarly valued. These stocks are Research Frontiers, Inc. (NASDAQ:REFR), Trinity Biotech plc (NASDAQ:TRIB), Pingtan Marine Enterprise Ltd. (NASDAQ:PME), PhenixFIN Corporation (NASDAQ:PFX), U.S. Well Services, Inc. (NASDAQ:USWS), Support.com, Inc. (NASDAQ:SPRT), and Perma-Fix Environmental Services, Inc. (NASDAQ:PESI). This group of stocks’ market values are similar to USAP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $16 million in USAP’s case. Trinity Biotech plc (NASDAQ:TRIB) is the most popular stock in this table. On the other hand Research Frontiers, Inc. (NASDAQ:REFR) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) is more popular among hedge funds. Our overall hedge fund sentiment score for USAP is 73. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately USAP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on USAP were disappointed as the stock returned -1.2% since the end of the first quarter (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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