Is United Bankshares, Inc. (UBSI) a Good Stock to Buy?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in United Bankshares, Inc. (NASDAQ:UBSI) .

Is United Bankshares, Inc. (NASDAQ:UBSI) the right investment to pursue these days? Hedge funds are categorically betting on the stock. The number of long hedge fund positions that are disclosed in regulatory 13F filings moved up by 2 recently. UBSI was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 6 hedge funds in our database with UBSI positions at the end of the previous quarter. 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 GameStop Corp. (NYSE:GME), Western Refining, Inc. (NYSE:WNR), and Wintrust Financial Corp (NASDAQ:WTFC) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, let’s check out the new action regarding United Bankshares, Inc. (NASDAQ:UBSI).

How have hedgies been trading United Bankshares, Inc. (NASDAQ:UBSI)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UBSI over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Balyasny Asset Management, led by Dmitry Balyasny, holds the number one position in United Bankshares, Inc. (NASDAQ:UBSI). Balyasny Asset Management has a $13.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Basswood Capital, led by Matthew Lindenbaum, which holds a $6.8 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions encompass  D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, key hedge funds have jumped into United Bankshares, Inc. (NASDAQ:UBSI) headfirst. Millennium Management, led by Israel Englander, assembled the most valuable position in United Bankshares, Inc. (NASDAQ:UBSI). Millennium Management had $5.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $3.7 million investment in the stock during the quarter. The only other fund with a brand new UBSI position is Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s also examine hedge fund activity in other stocks similar to United Bankshares, Inc. (NASDAQ:UBSI). These stocks are GameStop Corp. (NYSE:GME), Western Refining, Inc. (NYSE:WNR), Wintrust Financial Corp (NASDAQ:WTFC), and Healthcare Services Group, Inc. (NASDAQ:HCSG). This group of stocks’ market valuations match UBSI’s market valuation.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $39 million in UBSI’s case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand Healthcare Services Group, Inc. (NASDAQ:HCSG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks United Bankshares, Inc. (NASDAQ:UBSI) is as less popular than HCSG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None