Hedge Funds Aren’t Crazy About Ubiquiti Inc. (UI) Anymore

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Ubiquiti Inc. (NYSE:UI).

Is Ubiquiti Inc. (NYSE:UI) an excellent investment now? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions went down by 2 in recent months. Our calculations also showed that UI 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). UI was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 25 hedge funds in our database with UI positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the recent hedge fund action surrounding Ubiquiti Inc. (NYSE:UI).

How are hedge funds trading Ubiquiti Inc. (NYSE:UI)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards UI over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UI A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Ubiquiti Inc. (NYSE:UI), which was worth $104.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $17.8 million worth of shares. Arrowstreet Capital, Maverick Capital, and Harspring Capital Management 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 Harspring Capital Management allocated the biggest weight to Ubiquiti Inc. (NYSE:UI), around 4.35% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, setting aside 1.41 percent of its 13F equity portfolio to UI.

Due to the fact that Ubiquiti Inc. (NYSE:UI) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds who sold off their full holdings in the first quarter. Intriguingly, Gregory Bylinsky and Jefferson Gramm’s Bandera Partners sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $19.6 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Ubiquiti Inc. (NYSE:UI). We will take a look at Coupa Software Incorporated (NASDAQ:COUP), The AES Corporation (NYSE:AES), Teradyne, Inc. (NYSE:TER), and ONEOK, Inc. (NYSE:OKE). All of these stocks’ market caps resemble UI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COUP 66 2184206 11
AES 31 445516 4
TER 28 842457 -5
OKE 25 135073 -6
Average 37.5 901813 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $902 million. That figure was $162 million in UI’s case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand ONEOK, Inc. (NYSE:OKE) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Ubiquiti Inc. (NYSE:UI) is even less popular than OKE. Hedge funds clearly dropped the ball on UI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on UI as the stock returned 28.8% so far in the second quarter and outperformed the market by an even larger margin.

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