With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was United Microelectronics Corp (NYSE:UMC).
Is UMC a good stock to buy now? United Microelectronics Corp (NYSE:UMC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that UMC 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ONEOK, Inc. (NYSE:OKE), Dr. Reddy’s Laboratories Limited (NYSE:RDY), and Dynatrace, Inc. (NYSE:DT) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are viewed as worthless, old investment tools of years past. While there are over 8000 funds trading at the moment, Our experts hone in on the crème de la crème of this club, approximately 850 funds. These hedge fund managers oversee most of the smart money’s total capital, and by tailing their top investments, Insider Monkey has brought to light many investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. With all of this in mind let’s take a look at the latest hedge fund action encompassing United Microelectronics Corp (NYSE:UMC).
Do Hedge Funds Think UMC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards UMC over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in United Microelectronics Corp (NYSE:UMC), which was worth $88.9 million at the end of the third quarter. On the second spot was LMR Partners which amassed $24.3 million worth of shares. Arrowstreet Capital, Ovata Capital Management, and Millennium 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 Ovata Capital Management allocated the biggest weight to United Microelectronics Corp (NYSE:UMC), around 2.33% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, earmarking 0.5 percent of its 13F equity portfolio to UMC.
Due to the fact that United Microelectronics Corp (NYSE:UMC) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers who sold off their entire stakes in the third quarter. Interestingly, Daniel S. Och’s OZ Management said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $18.6 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $0.8 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to United Microelectronics Corp (NYSE:UMC). These stocks are ONEOK, Inc. (NYSE:OKE), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Dynatrace, Inc. (NYSE:DT), Evergy, Inc. (NYSE:EVRG), Open Text Corporation (NASDAQ:OTEX), Whirlpool Corporation (NYSE:WHR), and Teledyne Technologies Incorporated (NYSE:TDY). This group of stocks’ market valuations are similar to UMC’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 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $137 million in UMC’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks United Microelectronics Corp (NYSE:UMC) is even less popular than RDY. Our overall hedge fund sentiment score for UMC is 24.4. 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. Hedge funds clearly dropped the ball on UMC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on UMC as the stock returned 82.9% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.