Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Universal Logistics Holdings, Inc. (NASDAQ:ULH) investors should be aware of a decrease in hedge fund interest lately. Our calculations also showed that ULH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a look at the key hedge fund action encompassing Universal Logistics Holdings, Inc. (NASDAQ:ULH).
How are hedge funds trading Universal Logistics Holdings, Inc. (NASDAQ:ULH)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ULH 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 adding to their stakes substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Universal Logistics Holdings, Inc. (NASDAQ:ULH), which was worth $13.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $4.9 million worth of shares. Marshall Wace, Citadel Investment Group, and Arrowstreet Capital 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 Zebra Capital Management allocated the biggest weight to Universal Logistics Holdings, Inc. (NASDAQ:ULH), around 0.45% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to ULH.
Due to the fact that Universal Logistics Holdings, Inc. (NASDAQ:ULH) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds who sold off their entire stakes heading into Q4. Interestingly, David E. Shaw’s D E Shaw cut the biggest position of all the hedgies followed by Insider Monkey, worth about $0.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dumped about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Universal Logistics Holdings, Inc. (NASDAQ:ULH). These stocks are Casa Systems, Inc. (NASDAQ:CASA), TPI Composites, Inc. (NASDAQ:TPIC), Peoples Bancorp Inc. (NASDAQ:PEBO), and CEVA, Inc. (NASDAQ:CEVA). This group of stocks’ market values are closest to ULH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASA | 11 | 18858 | -2 |
| TPIC | 14 | 97850 | -2 |
| PEBO | 7 | 27640 | 0 |
| CEVA | 10 | 28922 | 0 |
| Average | 10.5 | 43318 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $28 million in ULH’s case. TPI Composites, Inc. (NASDAQ:TPIC) is the most popular stock in this table. On the other hand Peoples Bancorp Inc. (NASDAQ:PEBO) is the least popular one with only 7 bullish hedge fund positions. Universal Logistics Holdings, Inc. (NASDAQ:ULH) 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 ULH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ULH were disappointed as the stock returned -13.9% 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.
