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 Unisys Corporation (NYSE:UIS) and determine whether hedge funds had an edge regarding this stock.
Unisys Corporation (NYSE:UIS) has experienced an increase in activity from the world’s largest hedge funds recently. Unisys Corporation (NYSE:UIS) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 26. There were 16 hedge funds in our database with UIS positions at the end of the first quarter. Our calculations also showed that UIS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
To most stock holders, hedge funds are seen as worthless, outdated financial tools of the past. While there are over 8000 funds in operation at the moment, We hone in on the moguls of this club, around 850 funds. These money managers direct most of all hedge funds’ total asset base, and by observing their finest stock picks, Insider Monkey has spotted numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a look at the key hedge fund action regarding Unisys Corporation (NYSE:UIS).
How are hedge funds trading Unisys Corporation (NYSE:UIS)?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UIS over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Unisys Corporation (NYSE:UIS), with a stake worth $14.2 million reported as of the end of September. Trailing D E Shaw was Royce & Associates, which amassed a stake valued at $13.2 million. Arrowstreet Capital, Rutabaga Capital Management, and Harvey Partners 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 Harvey Partners allocated the biggest weight to Unisys Corporation (NYSE:UIS), around 6.18% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to UIS.
As industrywide interest jumped, some big names have been driving this bullishness. Fairpointe Capital, managed by Thyra Zerhusen, assembled the largest position in Unisys Corporation (NYSE:UIS). Fairpointe Capital had $2.5 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $0.3 million investment in the stock during the quarter. The other funds with brand new UIS positions are Donald Sussman’s Paloma Partners, Matthew Hulsizer’s PEAK6 Capital Management, and Jonathan Soros’s JS Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Unisys Corporation (NYSE:UIS) but similarly valued. We will take a look at Homology Medicines, Inc. (NASDAQ:FIXX), Federal Agricultural Mortgage Corp. (NYSE:AGM), OFG Bancorp (NYSE:OFG), Aerie Pharmaceuticals Inc (NASDAQ:AERI), Kearny Financial Corp. (NASDAQ:KRNY), Republic Bancorp, Inc. (NASDAQ:RBCAA), and Five Point Holdings, LLC (NYSE:FPH). All of these stocks’ market caps are closest to UIS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIXX | 16 | 52272 | 1 |
| AGM | 8 | 17724 | -1 |
| OFG | 11 | 10553 | -1 |
| AERI | 23 | 158080 | -1 |
| KRNY | 21 | 79424 | 6 |
| RBCAA | 5 | 7119 | 0 |
| FPH | 14 | 162958 | 1 |
| Average | 14 | 69733 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $59 million in UIS’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Republic Bancorp, Inc. KY (NASDAQ:RBCAA) is the least popular one with only 5 bullish hedge fund positions. Unisys Corporation (NYSE:UIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UIS is 68.8. 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 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately UIS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UIS were disappointed as the stock returned -2.2% in Q3 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 many of these stocks already outperformed the market so far this year.
Follow Unisys Corp (NYSE:UIS)
Follow Unisys Corp (NYSE:UIS)
Disclosure: None. This article was originally published at Insider Monkey.
