Is UNVR A Good Stock To Buy According To Hedge Funds?

In this article we will analyze whether Univar Solutions Inc (NYSE:UNVR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is UNVR a good stock to buy? Univar Solutions Inc (NYSE:UNVR) has experienced a decrease in support from the world’s most elite money managers of late. Univar Solutions Inc (NYSE:UNVR) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that UNVR 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.

Arnaud Ajdler Engine Capital

Arnaud Ajdler of Engine Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to take a look at the key hedge fund action surrounding Univar Solutions Inc (NYSE:UNVR).

Do Hedge Funds Think UNVR Is A Good Stock To Buy Now?

At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UNVR 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.

The largest stake in Univar Solutions Inc (NYSE:UNVR) was held by FPR Partners, which reported holding $189 million worth of stock at the end of September. It was followed by First Pacific Advisors LLC with a $159.3 million position. Other investors bullish on the company included Lyrical Asset Management, Iridian Asset Management, and Southeastern Asset Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Univar Solutions Inc (NYSE:UNVR), around 11.2% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, dishing out 6.49 percent of its 13F equity portfolio to UNVR.

Since Univar Solutions Inc (NYSE:UNVR) has faced declining sentiment from the smart money, logic holds that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into Q4. Interestingly, Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital cut the biggest stake of the 750 funds tracked by Insider Monkey, valued at about $40.1 million in stock, and Seth Klarman’s Baupost Group was right behind this move, as the fund cut about $21.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Univar Solutions Inc (NYSE:UNVR) but similarly valued. We will take a look at EnerSys (NYSE:ENS), Sorrento Therapeutics Inc (NASDAQ:SRNE), NCR Corporation (NYSE:NCR), Cogent Communications Holdings Inc. (NASDAQ:CCOI), TechnipFMC plc (NYSE:FTI), Sabra Health Care REIT Inc (NASDAQ:SBRA), and Acacia Communications, Inc. (NASDAQ:ACIA). This group of stocks’ market values match UNVR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENS 22 107763 -4
SRNE 13 100794 1
NCR 32 309659 0
CCOI 28 385884 0
FTI 31 549277 0
SBRA 24 156798 6
ACIA 32 1045851 -2
Average 26 379432 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $839 million in UNVR’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Sorrento Therapeutics Inc (NASDAQ:SRNE) is the least popular one with only 13 bullish hedge fund positions. Univar Solutions Inc (NYSE:UNVR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNVR is 69.7. 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 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately UNVR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UNVR were disappointed as the stock returned 9.8% since the end of September (through 12/18) 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.

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