The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded United Fire Group, Inc. (NASDAQ:UFCS) based on those filings.
United Fire Group, Inc. (NASDAQ:UFCS) has experienced a decrease in hedge fund sentiment recently. UFCS was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. There were 6 hedge funds in our database with UFCS holdings at the end of the previous quarter. Our calculations also showed that UFCS 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.
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 stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action encompassing United Fire Group, Inc. (NASDAQ:UFCS).
What does smart money think about United Fire Group, Inc. (NASDAQ:UFCS)?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards UFCS over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in United Fire Group, Inc. (NASDAQ:UFCS) was held by Renaissance Technologies, which reported holding $6.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $0.6 million position. Other investors bullish on the company included Two Sigma Advisors, AQR Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to United Fire Group, Inc. (NASDAQ:UFCS), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to UFCS.
Due to the fact that United Fire Group, Inc. (NASDAQ:UFCS) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that decided to sell off their entire stakes heading into Q4. Interestingly, Israel Englander’s Millennium Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, comprising close to $0.5 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $0.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Fire Group, Inc. (NASDAQ:UFCS) but similarly valued. These stocks are The Gorman-Rupp Company (NYSE:GRC), Group 1 Automotive, Inc. (NYSE:GPI), Bright Scholar Education Holdings Limited (NYSE:BEDU), and Alexander & Baldwin Inc (NYSE:ALEX). This group of stocks’ market valuations match UFCS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $8 million in UFCS’s case. Group 1 Automotive, Inc. (NYSE:GPI) is the most popular stock in this table. On the other hand The Gorman-Rupp Company (NYSE:GRC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks United Fire Group, Inc. (NASDAQ:UFCS) is even less popular than GRC. Hedge funds dodged a bullet by taking a bearish stance towards UFCS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately UFCS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); UFCS investors were disappointed as the stock returned -17.7% during the second quarter (through the end of May) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.