Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of United Technologies Corporation (NYSE:UTX).
United Technologies Corporation (NYSE:UTX) was in 59 hedge funds’ portfolios at the end of the first quarter of 2019. UTX investors should pay attention to a decrease in hedge fund sentiment of late. There were 64 hedge funds in our database with UTX holdings at the end of the previous quarter. Our calculations also showed that utx isn’t among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a glance at the key hedge fund action regarding United Technologies Corporation (NYSE:UTX).
Hedge fund activity in United Technologies Corporation (NYSE:UTX)
At the end of the first quarter, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in UTX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Viking Global, managed by Andreas Halvorsen, holds the largest position in United Technologies Corporation (NYSE:UTX). Viking Global has a $913.5 million position in the stock, comprising 5.2% of its 13F portfolio. On Viking Global’s heels is Third Point, managed by Dan Loeb, which holds a $835.2 million position; 9.3% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners, Bill Ackman’s Pershing Square and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC.
Seeing as United Technologies Corporation (NYSE:UTX) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers who sold off their positions entirely in the third quarter. Interestingly, Matthew Mark’s Jet Capital Investors sold off the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $74.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $48 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Technologies Corporation (NYSE:UTX) but similarly valued. These stocks are Sanofi (NASDAQ:SNY), Thermo Fisher Scientific Inc. (NYSE:TMO), NVIDIA Corporation (NASDAQ:NVDA), and Royal Bank of Canada (NYSE:RY). This group of stocks’ market valuations are closest to UTX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $1861 million. That figure was $6559 million in UTX’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 17 bullish hedge fund positions. United Technologies Corporation (NYSE:UTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on UTX, though not to the same extent, as the stock returned 0.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.