We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of United Bankshares, Inc. (NASDAQ:UBSI) based on that data.
United Bankshares, Inc. (NASDAQ:UBSI) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. UBSI was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with UBSI holdings at the end of the previous quarter. Our calculations also showed that UBSI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Matthew Lindenbaum of Basswood Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the key hedge fund action surrounding United Bankshares, Inc. (NASDAQ:UBSI).
What have hedge funds been doing with United Bankshares, Inc. (NASDAQ:UBSI)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 64% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in UBSI a year ago. 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, Millennium Management was the largest shareholder of United Bankshares, Inc. (NASDAQ:UBSI), with a stake worth $19.4 million reported as of the end of September. Trailing Millennium Management was Basswood Capital, which amassed a stake valued at $7 million. D E Shaw, Balyasny Asset Management, and Paloma 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 Signition LP allocated the biggest weight to United Bankshares, Inc. (NASDAQ:UBSI), around 1.15% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 0.49 percent of its 13F equity portfolio to UBSI.
As industrywide interest jumped, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in United Bankshares, Inc. (NASDAQ:UBSI). Millennium Management had $19.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $3.4 million position during the quarter. The other funds with brand new UBSI positions are Michael Gelband’s ExodusPoint Capital, Paul Tudor Jones’s Tudor Investment Corp, and Steve Cohen’s Point72 Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United Bankshares, Inc. (NASDAQ:UBSI) but similarly valued. These stocks are Bank OZK (NASDAQ:OZK), Blackbaud, Inc. (NASDAQ:BLKB), IBERIABANK Corporation (NASDAQ:IBKC), and Texas Roadhouse Inc (NASDAQ:TXRH). This group of stocks’ market valuations are similar to UBSI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OZK | 25 | 276283 | 4 |
| BLKB | 16 | 102843 | 2 |
| IBKC | 32 | 234876 | 10 |
| TXRH | 23 | 238041 | -2 |
| Average | 24 | 213011 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $52 million in UBSI’s case. IBERIABANK Corporation (NASDAQ:IBKC) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 16 bullish hedge fund positions. United Bankshares, Inc. (NASDAQ:UBSI) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately UBSI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UBSI investors were disappointed as the stock returned -40.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
