Is Uniti Group Inc. (UNIT) Going To Burn These Hedge Funds ?

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Uniti Group Inc. (NASDAQ:UNIT).

Is Uniti Group Inc. (NASDAQ:UNIT) the right investment to pursue these days? Money managers are in an optimistic mood. The number of long hedge fund positions moved up by 1 lately. Our calculations also showed that UNIT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). UNIT was in 22 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with UNIT positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Israel Englander of Millennium Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the latest hedge fund action encompassing Uniti Group Inc. (NASDAQ:UNIT).

Hedge fund activity in Uniti Group Inc. (NASDAQ:UNIT)

Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UNIT over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Kenneth Mario Garschina’s Mason Capital Management has the most valuable position in Uniti Group Inc. (NASDAQ:UNIT), worth close to $49.2 million, corresponding to 12% of its total 13F portfolio. Coming in second is D E Shaw, led by David E. Shaw, holding a $43.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Martin Hughes’s Toscafund Asset Management, Mendel Hui’s Isomer Partners and Daniel Patrick Gibson’s Sylebra Capital Management. In terms of the portfolio weights assigned to each position Toscafund Asset Management allocated the biggest weight to Uniti Group Inc. (NASDAQ:UNIT), around 24.85% of its 13F portfolio. Aurelius Capital Management is also relatively very bullish on the stock, earmarking 13.61 percent of its 13F equity portfolio to UNIT.

As aggregate interest increased, some big names have jumped into Uniti Group Inc. (NASDAQ:UNIT) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Uniti Group Inc. (NASDAQ:UNIT). Citadel Investment Group had $2.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new UNIT investors: Brandon Haley’s Holocene Advisors, Michael Gelband’s ExodusPoint Capital, and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks similar to Uniti Group Inc. (NASDAQ:UNIT). These stocks are Berkshire Hills Bancorp, Inc. (NYSE:BHLB), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), Uniqure NV (NASDAQ:QURE), and Yunji Inc. (NASDAQ:YJ). All of these stocks’ market caps match UNIT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHLB 10 39828 1
KLIC 19 255818 2
QURE 38 538224 4
YJ 3 5331 -1
Average 17.5 209800 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $173 million in UNIT’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand Yunji Inc. (NASDAQ:YJ) is the least popular one with only 3 bullish hedge fund positions. Uniti Group Inc. (NASDAQ:UNIT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately UNIT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UNIT were disappointed as the stock returned -13.5% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.