Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Utz Brands Inc (NYSE:UTZ).
Is UTZ a good stock to buy now? Utz Brands Inc (NYSE:UTZ) has seen a decrease in hedge fund sentiment in recent months. Utz Brands Inc (NYSE:UTZ) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. There were 19 hedge funds in our database with UTZ holdings at the end of June. Our calculations also showed that UTZ 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing Utz Brands Inc (NYSE:UTZ).
Do Hedge Funds Think UTZ Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in UTZ a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Southpoint Capital Advisors was the largest shareholder of Utz Brands Inc (NYSE:UTZ), with a stake worth $71.6 million reported as of the end of September. Trailing Southpoint Capital Advisors was Engle Capital, which amassed a stake valued at $37.6 million. Scopus Asset Management, Millennium Management, and Holocene Advisors 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 Engle Capital allocated the biggest weight to Utz Brands Inc (NYSE:UTZ), around 5.93% of its 13F portfolio. Southpoint Capital Advisors is also relatively very bullish on the stock, earmarking 1.63 percent of its 13F equity portfolio to UTZ.
Seeing as Utz Brands Inc (NYSE:UTZ) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that slashed their entire stakes heading into Q4. Intriguingly, David Costen Haley’s HBK Investments sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $16.4 million in stock. Isaac Corre’s fund, Governors Lane, also sold off its stock, about $12.3 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Utz Brands Inc (NYSE:UTZ) but similarly valued. We will take a look at Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), Federated Hermes, Inc. (NYSE:FHI), Guangshen Railway Co. Ltd (NYSE:GSH), PagerDuty, Inc. (NYSE:PD), Greif, Inc. (NYSE:GEF), Beacon Roofing Supply, Inc. (NASDAQ:BECN), and Sumo Logic, Inc. (NASDAQ:SUMO). This group of stocks’ market valuations match UTZ’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 17 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $166 million in UTZ’s case. Federated Hermes, Inc. (NYSE:FHI) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Utz Brands Inc (NYSE:UTZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UTZ is 49.7. 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. 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 30.7% in 2020 through December 14th and beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on UTZ, though not to the same extent, as the stock returned 9.6% since the end of Q3 (through December 14th) and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.