In this article we are going to use hedge fund sentiment as a tool and determine whether UFP Industries, Inc. (NASDAQ:UFPI) 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 UFPI a good stock to buy now? UFP Industries, Inc. (NASDAQ:UFPI) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. UFP Industries, Inc. (NASDAQ:UFPI) was in 20 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 27. There were 18 hedge funds in our database with UFPI holdings at the end of June. Our calculations also showed that UFPI 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 take a look at the fresh hedge fund action surrounding UFP Industries, Inc. (NASDAQ:UFPI).
Do Hedge Funds Think UFPI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UFPI over the last 21 quarters. 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in UFP Industries, Inc. (NASDAQ:UFPI), worth close to $25.5 million, amounting to less than 0.1%% of its total 13F portfolio. On Arrowstreet Capital’s heels is SG Capital Management, led by Ken Grossman and Glen Schneider, holding a $18.1 million position; 5.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Chuck Royce’s Royce & Associates, Ken Fisher’s Fisher Asset Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to UFP Industries, Inc. (NASDAQ:UFPI), around 5.21% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.39 percent of its 13F equity portfolio to UFPI.
As one would reasonably expect, key money managers have been driving this bullishness. Renaissance Technologies, assembled the largest position in UFP Industries, Inc. (NASDAQ:UFPI). Renaissance Technologies had $4.7 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $2.8 million investment in the stock during the quarter. The following funds were also among the new UFPI investors: Donald Sussman’s Paloma Partners, Hoon Kim’s Quantinno Capital, and Peter Muller’s PDT Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as UFP Industries, Inc. (NASDAQ:UFPI) but similarly valued. These stocks are Semtech Corporation (NASDAQ:SMTC), Alamos Gold Inc (NYSE:AGI), Foot Locker, Inc. (NYSE:FL), Sogou Inc. (NYSE:SOGO), LivePerson, Inc. (NASDAQ:LPSN), The Chemours Company (NYSE:CC), and Cosan Limited (NYSE:CZZ). This group of stocks’ market valuations are similar to UFPI’s market valuation.
|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 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $93 million in UFPI’s case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 14 bullish hedge fund positions. UFP Industries, Inc. (NASDAQ:UFPI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UFPI is 50.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 15.8 percentage points. Unfortunately UFPI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UFPI investors were disappointed as the stock returned -1.6% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.