Hedge Funds Are Dumping Universal Forest Products, Inc. (UFPI): What Are They Afraid Of?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Universal Forest Products, Inc. (NASDAQ:UFPI) investors should be aware of a decrease in support from the world’s most successful money managers of late. 14 hedge funds that we track were long the stock on September 30. There were 15 hedge funds in our database with UFPI holdings at the end of the June quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hawk Corporation (NYSE:HAWK), Grand Canyon Education Inc (NASDAQ:LOPE), and Abengoa Yield PLC (NASDAQ:ABY) to gather more data points.

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Hedge fund activity in Universal Forest Products, Inc. (NASDAQ:UFPI)

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a 7% dip from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UFPI over the last 5 quarters, which has generally trended down. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

HedgeFundSentimentChart

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Universal Forest Products, Inc. (NASDAQ:UFPI). Arrowstreet Capital has a $23.9 million position in the stock. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $23.7 million position. Other professional money managers that hold long positions include Cliff Asness’ AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Jim Simons’ Renaissance Technologies. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Universal Forest Products, Inc. (NASDAQ:UFPI) has gone through falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers that slashed their entire stakes heading into Q4. Interestingly, Drew Cupps’ Cupps Capital Management said goodbye to the largest position of the 700 funds tracked by Insider Monkey, worth close to $0.9 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.5 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Universal Forest Products, Inc. (NASDAQ:UFPI) but similarly valued. We will take a look at Hawk Corporation (NYSE:HAWK), Grand Canyon Education Inc (NASDAQ:LOPE), Abengoa Yield PLC (NASDAQ:ABY), and EverBank Financial Corp (NYSE:EVER). This group of stocks’ market valuations are closest to UFPI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAWK 31 327962 9
LOPE 19 133360 0
ABY 13 385412 1
EVER 16 510217 7

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $83 million in UFPI’s case. Hawk Corporation (NYSE:HAWK) is the most popular stock in this table. On the other hand Abengoa Yield PLC (NASDAQ:ABY) is the least popular one with only 13 bullish hedge fund positions. Universal Forest Products, Inc. (NASDAQ:UFPI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HAWK might be a better candidate to consider taking a long position in.

Disclosure: None