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Hedge Funds’ #21 Stock Pick Debunked Naysayers

“I have been following Dr. Inan Dogan since this outbreak, and he is  a phenomenally intelligent researcher. One month ago, Dr. Dogan’s prediction that the total U.S. death toll would be 20,000+ by April 15th was deemed “radical”. His Recession is Imminent article in February was very timely. Now he believes we could quickly end lockdowns in NYC after some simple testing. A must read” were the words used by our readers to describe our latest article.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going even though the mainstream financial media journalists don’t agree with this approach. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Uber Technologies, Inc. (NYSE:UBER).

Uber Technologies, Inc. (NYSE:UBER) shareholders have witnessed an increase in enthusiasm from smart money in recent months. UBER was in 94 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 48 hedge funds in our database with UBER holdings at the end of the previous quarter. Our calculations also showed that UBER ranked 21st among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

If you listen to the mainstream financial media, you should avoid stock picking and invest in low-cost index funds. This is indeed what you should do if you want to generate average returns. Mainstream financial media journalists try to make you believe that it isn’t possible to pick winners and losers, and you should ignore the stock picks of hedge fund managers. You may remember reading an article in the WSJ that said “random dart throwing monkeys beat hedge fund stars”. What they fail to tell you is that the top 5 hedge fund stocks returned more than 30% since the end of 2018 and beat the S&P 500 Index by nearly 25 percentage points. You can’t explain this kind of outperformance by luck or coincidence. WSJ will need an army of monkeys to throw darts and tens of thousands of attempts to match these returns.

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action surrounding Uber Technologies, Inc. (NYSE:UBER).

Hedge fund activity in Uber Technologies, Inc. (NYSE:UBER)

At Q4’s end, a total of 94 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 96% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in UBER over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Viking Global was the largest shareholder of Uber Technologies, Inc. (NYSE:UBER), with a stake worth $1132.9 million reported as of the end of September. Trailing Viking Global was Tiger Global Management LLC, which amassed a stake valued at $642.8 million. Altimeter Capital Management, Citadel Investment Group, and Hillhouse Capital Management 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 Glade Brook Capital Partners allocated the biggest weight to Uber Technologies, Inc. (NYSE:UBER), around 61.72% of its 13F portfolio. Tao Capital is also relatively very bullish on the stock, setting aside 58.64 percent of its 13F equity portfolio to UBER.

As one would reasonably expect, key money managers were breaking ground themselves. Jericho Capital Asset Management, managed by Josh Resnick, created the most valuable position in Uber Technologies, Inc. (NYSE:UBER). Jericho Capital Asset Management had $153.6 million invested in the company at the end of the quarter. Ricky Sandler’s Eminence Capital also made a $133 million investment in the stock during the quarter. The other funds with new positions in the stock are Nicholas J. Pritzker’s Tao Capital, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management, and Scott Ferguson’s Sachem Head Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Uber Technologies, Inc. (NYSE:UBER) but similarly valued. We will take a look at Norfolk Southern Corp. (NYSE:NSC), Suncor Energy Inc. (NYSE:SU), HCA Healthcare Inc (NYSE:HCA), and TC Energy Corporation (NYSE:TRP). This group of stocks’ market caps are similar to UBER’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSC 52 1931031 2
SU 39 1487356 -2
HCA 63 3585533 3
TRP 22 210177 2
Average 44 1803524 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $1804 million. That figure was $6677 million in UBER’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Uber Technologies, Inc. (NYSE:UBER) is more popular among hedge funds. 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 lost 1.0% in 2020 through April 20th but still managed to beat the market by 11 percentage points. Hedge funds were also right about betting on UBER, though not to the same extent, as the stock returned -5.2% in 2020 (through April 20th) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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