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Hedge Funds Turning Off Universal Display Corporation (OLED)

We at Insider Monkey have gone over 821 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 March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Universal Display Corporation (NASDAQ:OLED) based on that data.

Is Universal Display Corporation (NASDAQ:OLED) a buy, sell, or hold? Prominent investors are turning less bullish. The number of long hedge fund positions decreased by 7 recently. Our calculations also showed that OLED 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 go over the new hedge fund action encompassing Universal Display Corporation (NASDAQ:OLED).

Hedge fund activity in Universal Display Corporation (NASDAQ:OLED)

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in OLED over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is OLED A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Universal Display Corporation (NASDAQ:OLED), with a stake worth $87.3 million reported as of the end of September. Trailing Renaissance Technologies was Alyeska Investment Group, which amassed a stake valued at $41.5 million. Citadel Investment Group, Citadel Investment Group, and Two Sigma Advisors 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 Navellier & Associates allocated the biggest weight to Universal Display Corporation (NASDAQ:OLED), around 1.45% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to OLED.

Because Universal Display Corporation (NASDAQ:OLED) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few money managers that slashed their entire stakes in the first quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $7.5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $6.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 7 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 Display Corporation (NASDAQ:OLED) but similarly valued. We will take a look at PPD, Inc. (NASDAQ:PPD), OGE Energy Corp. (NYSE:OGE), A. O. Smith Corporation (NYSE:AOS), and Ciena Corporation (NASDAQ:CIEN). All of these stocks’ market caps resemble OLED’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPD 27 512293 27
OGE 21 215864 4
AOS 25 363596 -1
CIEN 31 301426 -4
Average 26 348295 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $223 million in OLED’s case. Ciena Corporation (NASDAQ:CIEN) is the most popular stock in this table. On the other hand OGE Energy Corp. (NYSE:OGE) is the least popular one with only 21 bullish hedge fund positions. Universal Display Corporation (NASDAQ:OLED) is not the least popular stock in this group but hedge fund interest is still below average. 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 but beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on OLED, though not to the same extent, as the stock returned 24.8% during the second quarter and outperformed the market.

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