Is UA A Good Stock To Buy Now?

In this article we are going to use hedge fund sentiment as a tool and determine whether Under Armour Inc (NYSE:UA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is UA a good stock to buy now? Under Armour Inc (NYSE:UA) investors should be aware of an increase in activity from the world’s largest hedge funds of late. Under Armour Inc (NYSE:UA) was in 48 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 40 hedge funds in our database with UA holdings at the end of June. Our calculations also showed that UA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s view the new hedge fund action regarding Under Armour Inc (NYSE:UA).

Do Hedge Funds Think UA Is A Good Stock To Buy Now?

At third quarter’s end, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in UA over the last 21 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is UA A Good Stock To Buy?

More specifically, Adage Capital Management was the largest shareholder of Under Armour Inc (NYSE:UA), with a stake worth $176.1 million reported as of the end of September. Trailing Adage Capital Management was Adage Capital Management, which amassed a stake valued at $161.1 million. Ako Capital, D E Shaw, and Coatue Management 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 CQS Cayman LP allocated the biggest weight to Under Armour Inc (NYSE:UA), around 3.77% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, earmarking 1.78 percent of its 13F equity portfolio to UA.

Now, key money managers have jumped into Under Armour Inc (NYSE:UA) headfirst. Ako Capital, managed by Nicolai Tangen, created the biggest position in Under Armour Inc (NYSE:UA). Ako Capital had $113.6 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $37.4 million position during the quarter. The other funds with new positions in the stock are Michael Hintze’s CQS Cayman LP, Philippe Laffont’s Coatue Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks similar to Under Armour Inc (NYSE:UA). These stocks are Primerica, Inc. (NYSE:PRI), ICL Group Ltd. (NYSE:ICL), Asana Inc. (NYSE:ASAN), Signature Bank (NASDAQ:SBNY), Virtu Financial Inc (NASDAQ:VIRT), Haemonetics Corporation (NYSE:HAE), and Change Healthcare Inc. (NASDAQ:CHNG). This group of stocks’ market values are closest to UA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRI 35 436663 10
ICL 5 18886 0
ASAN 17 219416 17
SBNY 35 344263 11
VIRT 26 264490 -2
HAE 32 645632 -7
CHNG 49 1360900 2
Average 28.4 470036 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $470 million. That figure was $847 million in UA’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Under Armour Inc (NYSE:UA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UA is 88.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on UA as the stock returned 54.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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