Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Universal Forest Products, Inc. (NASDAQ:UFPI).
Is Universal Forest Products, Inc. (NASDAQ:UFPI) going to take off soon? Money managers are selling. The number of bullish hedge fund positions retreated by 2 in recent months. Our calculations also showed that ufpi isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the latest hedge fund action regarding Universal Forest Products, Inc. (NASDAQ:UFPI).
How are hedge funds trading Universal Forest Products, Inc. (NASDAQ:UFPI)?
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in UFPI 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, Fisher Asset Management was the largest shareholder of Universal Forest Products, Inc. (NASDAQ:UFPI), with a stake worth $14.9 million reported as of the end of December. Trailing Fisher Asset Management was Renaissance Technologies, which amassed a stake valued at $5.6 million. Algert Coldiron Investors, Covalent Capital Partners, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Since Universal Forest Products, Inc. (NASDAQ:UFPI) has experienced a decline in interest from the smart money, logic holds that there was a specific group of money managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $1.8 million in stock, and Ken Grossman and Glen Schneider’s SG Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Universal Forest Products, Inc. (NASDAQ:UFPI). These stocks are Dillard’s, Inc. (NYSE:DDS), Prestige Consumer Healthcare Inc. (NYSE:PBH), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), and Harsco Corporation (NYSE:HSC). This group of stocks’ market valuations match UFPI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DDS | 14 | 102725 | -2 |
| PBH | 15 | 72873 | 1 |
| IRWD | 17 | 306249 | 0 |
| HSC | 24 | 112545 | 2 |
| Average | 17.5 | 148598 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $44 million in UFPI’s case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand Dillard’s, Inc. (NYSE:DDS) is the least popular one with only 14 bullish hedge fund positions. Universal Forest Products, Inc. (NASDAQ:UFPI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on UFPI, though not to the same extent, as the stock returned 18.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
