The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought United Therapeutics Corporation (NASDAQ:UTHR) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
United Therapeutics Corporation (NASDAQ:UTHR) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. United Therapeutics Corporation (NASDAQ:UTHR) was in 41 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently reached a new all time high. Our calculations also showed that UTHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 56 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. 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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s check out the latest hedge fund action encompassing United Therapeutics Corporation (NASDAQ:UTHR).
What does smart money think about United Therapeutics Corporation (NASDAQ:UTHR)?
At second quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in UTHR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in United Therapeutics Corporation (NASDAQ:UTHR), which was worth $450.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $133.1 million worth of shares. AQR Capital Management, Citadel Investment Group, and Palo Alto Investors 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 Great Point Partners allocated the biggest weight to United Therapeutics Corporation (NASDAQ:UTHR), around 6% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, earmarking 5.9 percent of its 13F equity portfolio to UTHR.
Consequently, key money managers have jumped into United Therapeutics Corporation (NASDAQ:UTHR) headfirst. Eversept Partners, managed by Kamran Moghtaderi, established the most outsized position in United Therapeutics Corporation (NASDAQ:UTHR). Eversept Partners had $28.2 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $4.8 million position during the quarter. The following funds were also among the new UTHR investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Mitch Kuflik and Rob Sobel’s Brahman Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. These stocks are Levi Strauss & Co. (NYSE:LEVI), FLIR Systems, Inc. (NASDAQ:FLIR), Axalta Coating Systems Ltd (NYSE:AXTA), Nielsen Holdings plc (NYSE:NLSN), Comerica Incorporated (NYSE:CMA), PLDT Inc. (NYSE:PHI), and Ralph Lauren Corporation (NYSE:RL). This group of stocks’ market values match UTHR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $1344 million in UTHR’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UTHR is 82.9. 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. This is a slightly positive signal but 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately UTHR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UTHR were disappointed as the stock returned -11.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.