It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Unit Corporation (NYSE:UNT) during the quarter below.
Unit Corporation (NYSE:UNT) investors should be aware of an increase in hedge fund interest of late. UNT was in 15 hedge funds’ portfolios at the end of December. There were 10 hedge funds in our database with UNT positions at the end of the previous quarter. Our calculations also showed that UNT 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’ 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 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 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.
Let’s take a peek at the latest hedge fund action surrounding Unit Corporation (NYSE:UNT).
How have hedgies been trading Unit Corporation (NYSE:UNT)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UNT over the last 14 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.
Among these funds, Royce & Associates held the most valuable stake in Unit Corporation (NYSE:UNT), which was worth $2.3 million at the end of the fourth quarter. On the second spot was Prescott Group Capital Management which amassed $1.2 million worth of shares. Moreover, Algert Coldiron Investors, Millennium Management, and D E Shaw were also bullish on Unit Corporation (NYSE:UNT), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, assembled the most valuable position in Unit Corporation (NYSE:UNT). D E Shaw had $0.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Hoon Kim’s Quantinno Capital, and Noam Gottesman’s GLG Partners.
Let’s also examine hedge fund activity in other stocks similar to Unit Corporation (NYSE:UNT). These stocks are Nexeo Solutions, Inc. (NASDAQ:NXEO), Schweitzer-Mauduit International, Inc. (NYSE:SWM), The Providence Service Corporation (NASDAQ:PRSC), and Partner Communications Company Ltd (NASDAQ:PTNR). This group of stocks’ market caps are similar to UNT’s market cap.
|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 12 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $9 million in UNT’s case. Nexeo Solutions, Inc. (NASDAQ:NXEO) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 2 bullish hedge fund positions. Unit Corporation (NYSE:UNT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately UNT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on UNT were disappointed as the stock returned 10.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.