How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding United Bankshares, Inc. (NASDAQ:UBSI).
Is UBSI a good stock to buy now? The smart money was turning bullish. The number of long hedge fund positions inched up by 3 in recent months. United Bankshares, Inc. (NASDAQ:UBSI) was in 19 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UBSI 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 we’re going to go over the key hedge fund action surrounding United Bankshares, Inc. (NASDAQ:UBSI).
Do Hedge Funds Think UBSI Is A Good Stock To Buy Now?
At the end of September, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UBSI over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of United Bankshares, Inc. (NASDAQ:UBSI), with a stake worth $19.7 million reported as of the end of September. Trailing Citadel Investment Group was Basswood Capital, which amassed a stake valued at $4.8 million. Millennium Management, Balyasny Asset Management, and GLG Partners 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 JCSD Capital allocated the biggest weight to United Bankshares, Inc. (NASDAQ:UBSI), around 1.05% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, earmarking 0.47 percent of its 13F equity portfolio to UBSI.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the most valuable position in United Bankshares, Inc. (NASDAQ:UBSI). Tudor Investment Corp had $1.1 million invested in the company at the end of the quarter. Joseph P. Colmery and Steven J. Didion’s JCSD Capital also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Phil Stone’s Fourthstone LLC, and Donald Sussman’s Paloma Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United Bankshares, Inc. (NASDAQ:UBSI) but similarly valued. We will take a look at FireEye Inc (NASDAQ:FEYE), Trupanion Inc (NASDAQ:TRUP), Mantech International Corp (NASDAQ:MANT), Blackbaud, Inc. (NASDAQ:BLKB), Valley National Bancorp (NASDAQ:VLY), eXp World Holdings, Inc. (NASDAQ:EXPI), and American States Water Co (NYSE:AWR). This group of stocks’ market caps are closest to UBSI’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 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $39 million in UBSI’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Trupanion Inc (NASDAQ:TRUP) is the least popular one with only 12 bullish hedge fund positions. United Bankshares, Inc. (NASDAQ:UBSI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UBSI is 59.9. 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 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 UBSI as the stock returned 43.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.