Hedge Funds Are Crazy About Domtar Corporation (UFS)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Domtar Corporation (NYSE:UFS) in this article.

Domtar Corporation (NYSE:UFS) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. UFS shareholders have witnessed an increase in enthusiasm from smart money of late. There were 25 hedge funds in our database with UFS positions at the end of the fourth quarter. Our calculations also showed that UFS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Clint Carlson of Carlson Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 let’s take a look at the fresh hedge fund action surrounding Domtar Corporation (NYSE:UFS).

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

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UFS over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Arctis Global was the largest shareholder of Domtar Corporation (NYSE:UFS), with a stake worth $59 million reported as of the end of March. Trailing Arctis Global was Carlson Capital, which amassed a stake valued at $36.1 million. Millennium Management, Two Sigma Advisors, and Arrowstreet Capital 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 Arctis Global allocated the biggest weight to Domtar Corporation (NYSE:UFS), around 8.37% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, setting aside 6.23 percent of its 13F equity portfolio to UFS.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Arctis Global, managed by Viraj Mehta, established the most outsized position in Domtar Corporation (NYSE:UFS). Arctis Global had $59 million invested in the company at the end of the quarter. David Rosen’s Rubric Capital Management also initiated a $21.3 million position during the quarter. The other funds with new positions in the stock are Ken Heebner’s Capital Growth Management, Robert Vincent McHugh’s Jade Capital Advisors, and Marc Majzner’s Clearline Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Domtar Corporation (NYSE:UFS) but similarly valued. These stocks are United Natural Foods, Inc. (NYSE:UNFI), Hercules Capital Inc (NYSE:HTGC), Osisko Gold Royalties Ltd (NYSE:OR), Embraer SA (NYSE:ERJ), Euronav NV (NYSE:EURN), Aurora Cannabis Inc. (NASDAQ:ACB), and MFA Financial, Inc. (NYSE:MFA). All of these stocks’ market caps match UFS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNFI 23 103388 7
HTGC 10 30102 -2
OR 18 165245 2
ERJ 14 224549 3
EURN 17 93365 3
ACB 12 48845 2
MFA 16 104285 -6
Average 15.7 109968 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $286 million in UFS’s case. United Natural Foods, Inc. (NYSE:UNFI) is the most popular stock in this table. On the other hand Hercules Capital Inc (NYSE:HTGC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Domtar Corporation (NYSE:UFS) is more popular among hedge funds. Our overall hedge fund sentiment score for UFS is 87. 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 returned 24% in 2021 through July 9th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on UFS as the stock returned 48.1% since the end of March (through 7/9) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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