Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about UBS Group AG (NYSE:UBS).
Is UBS a good stock to buy now? UBS Group AG (NYSE:UBS) has experienced an increase in activity from the world’s largest hedge funds of late. UBS Group AG (NYSE:UBS) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. There were 16 hedge funds in our database with UBS positions at the end of the second quarter. Our calculations also showed that UBS 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 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 S&P 500 ETFs by 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s review the new hedge fund action surrounding UBS Group AG (NYSE:UBS).
Do Hedge Funds Think UBS Is A Good Stock To Buy Now?
At third quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards UBS over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Rajiv Jain’s GQG Partners has the largest position in UBS Group AG (NYSE:UBS), worth close to $273.3 million, comprising 0.9% of its total 13F portfolio. The second largest stake is held by Paul Marshall and Ian Wace of Marshall Wace LLP, with a $91.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Richard S. Pzena’s Pzena Investment Management, Renaissance Technologies and Crispin Odey’s Odey Asset Management Group. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to UBS Group AG (NYSE:UBS), around 2.55% of its 13F portfolio. GQG Partners is also relatively very bullish on the stock, dishing out 0.93 percent of its 13F equity portfolio to UBS.
As industrywide interest jumped, some big names have been driving this bullishness. GQG Partners, managed by Rajiv Jain, assembled the most valuable position in UBS Group AG (NYSE:UBS). GQG Partners had $273.3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1.1 million position during the quarter. The following funds were also among the new UBS investors: Andre F. Perold’s HighVista Strategies and David Andre and Astro Teller’s Cerebellum Capital.
Let’s also examine hedge fund activity in other stocks similar to UBS Group AG (NYSE:UBS). We will take a look at DocuSign, Inc. (NASDAQ:DOCU), General Dynamics Corporation (NYSE:GD), Thomson Reuters Corporation (NYSE:TRI), TC Energy Corporation (NYSE:TRP), DexCom, Inc. (NASDAQ:DXCM), Emerson Electric Co. (NYSE:EMR), and Public Storage (NYSE:PSA). All of these stocks’ market caps are similar to UBS’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 35 hedge funds with bullish positions and the average amount invested in these stocks was $1686 million. That figure was $498 million in UBS’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 16 bullish hedge fund positions. UBS Group AG (NYSE:UBS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UBS is 35.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on UBS as the stock returned 28.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Follow U B S Ag (NYSE:UBS)
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Disclosure: None. This article was originally published at Insider Monkey.