Hedge Funds Are Dumping United Rentals, Inc. (URI)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding United Rentals, Inc. (NYSE:URI).

United Rentals, Inc. (NYSE:URI) investors should be aware of a decrease in hedge fund interest of late. United Rentals, Inc. (NYSE:URI) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 59. There were 47 hedge funds in our database with URI holdings at the end of June. Our calculations also showed that URI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding United Rentals, Inc. (NYSE:URI).

Michael Gelband of ExodusPoint Capital

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

Heading into the fourth quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards URI over the last 25 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the largest position in United Rentals, Inc. (NYSE:URI), worth close to $462.4 million, accounting for 5.9% of its total 13F portfolio. The second largest stake is held by Impax Asset Management, managed by Ian Simm, which holds a $138.4 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Ross Turner’s Pelham Capital, and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 7.12% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, setting aside 5.93 percent of its 13F equity portfolio to URI.

Because United Rentals, Inc. (NYSE:URI) has faced a decline in interest from the smart money, logic holds that there were a few funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital dumped the biggest position of all the hedgies monitored by Insider Monkey, comprising close to $25.5 million in call options. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its call options, about $9.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 10 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to United Rentals, Inc. (NYSE:URI). We will take a look at ZTO Express (Cayman) Inc. (NYSE:ZTO), Bilibili Inc. (NASDAQ:BILI), Fortive Corporation (NYSE:FTV), Realty Income Corporation (NYSE:O), Coca-Cola Europacific Partners PLC (NASDAQ:CCEP), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), and Toast Inc. (NYSE:TOST). This group of stocks’ market valuations resemble URI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZTO 20 1019859 -1
BILI 35 1509730 -12
FTV 32 2130115 1
O 22 275031 -1
CCEP 32 1192664 1
TLK 4 170252 -1
TOST 38 567350 38
Average 26.1 980714 3.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $981 million. That figure was $1382 million in URI’s case. Toast Inc. (NYSE:TOST) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. United Rentals, Inc. (NYSE:URI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for URI is 62.3. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately URI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on URI were disappointed as the stock returned -3.5% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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