The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards United Financial Bancorp, Inc. (NASDAQ:UBNK), and what that likely means for the prospects of the company and its stock.
United Financial Bancorp, Inc. (NASDAQ:UBNK) investors should pay attention to an increase in enthusiasm from smart money lately. Our calculations also showed that UBNK isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the key hedge fund action regarding United Financial Bancorp, Inc. (NASDAQ:UBNK).
Hedge fund activity in United Financial Bancorp, Inc. (NASDAQ:UBNK)
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UBNK over the last 16 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in United Financial Bancorp, Inc. (NASDAQ:UBNK) was held by Castine Capital Management, which reported holding $27.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $25 million position. Other investors bullish on the company included Mendon Capital Advisors, D E Shaw, and Arrowstreet Capital.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in United Financial Bancorp, Inc. (NASDAQ:UBNK). Arrowstreet Capital had $1.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to United Financial Bancorp, Inc. (NASDAQ:UBNK). We will take a look at RadNet Inc. (NASDAQ:RDNT), Ituran Location and Control Ltd. (NASDAQ:ITRN), Global Cord Blood Corporation (NYSE:CO), and Endurance International Group Holdings Inc (NASDAQ:EIGI). This group of stocks’ market valuations match UBNK’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $71 million in UBNK’s case. Ituran Location and Control Ltd. (NASDAQ:ITRN) is the most popular stock in this table. On the other hand Global Cord Blood Corporation (NYSE:CO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks United Financial Bancorp, Inc. (NASDAQ:UBNK) is even less popular than CO. Hedge funds dodged a bullet by taking a bearish stance towards UBNK. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately UBNK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); UBNK investors were disappointed as the stock returned -3.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.