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Hedge Funds Are Falling Out Of Love With Universal Corp (UVV)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Universal Corp (NYSE:UVV).

Universal Corp (NYSE:UVV) has seen a decrease in support from the world’s most elite money managers recently. Our calculations also showed that UVV isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action encompassing Universal Corp (NYSE:UVV).

What does smart money think about Universal Corp (NYSE:UVV)?

At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UVV over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in Universal Corp (NYSE:UVV). Renaissance Technologies has a $31.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Pzena Investment Management, managed by Richard S. Pzena, which holds a $26 million position; 0.2% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Matthew Hulsizer’s PEAK6 Capital Management, Ken Griffin’s Citadel Investment Group and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Universal Corp (NYSE:UVV), around 0.2% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to UVV.

Since Universal Corp (NYSE:UVV) has faced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers who sold off their entire stakes in the first quarter. It’s worth mentioning that David Harding’s Winton Capital Management said goodbye to the largest position of all the hedgies followed by Insider Monkey, worth about $8.7 million in stock. Noam Gottesman’s fund, GLG Partners, also said goodbye to its stock, about $2.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 5 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Universal Corp (NYSE:UVV) but similarly valued. We will take a look at City Holding Company (NASDAQ:CHCO), So-Young International Inc. (NASDAQ:SY), Super Micro Computer, Inc. (NASDAQ:SMCI), and Allegheny Technologies Incorporated (NYSE:ATI). This group of stocks’ market valuations are closest to UVV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHCO 6 18195 -7
SY 6 38355 -1
SMCI 24 432701 22
ATI 26 94777 -1
Average 15.5 146007 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $65 million in UVV’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand City Holding Company (NASDAQ:CHCO) is the least popular one with only 6 bullish hedge fund positions. Universal Corp (NYSE:UVV) 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. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately UVV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UVV investors were disappointed as the stock returned -3.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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