At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Universal Corp (NYSE:UVV) makes for a good investment right now.
Is UVV a good stock to buy now? Universal Corp (NYSE:UVV) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 18. UVV has experienced a decrease in activity from the world’s largest hedge funds lately. There were 13 hedge funds in our database with UVV holdings at the end of June. Our calculations also showed that UVV 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.
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. With all of this in mind we’re going to review the new hedge fund action encompassing Universal Corp (NYSE:UVV).
Do Hedge Funds Think UVV Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in UVV a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Universal Corp (NYSE:UVV), with a stake worth $36.2 million reported as of the end of September. Trailing Renaissance Technologies was Pzena Investment Management, which amassed a stake valued at $26.9 million. Navellier & Associates, Arrowstreet Capital, and Citadel Investment Group 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 Navellier & Associates allocated the biggest weight to Universal Corp (NYSE:UVV), around 0.71% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to UVV.
Due to the fact that Universal Corp (NYSE:UVV) has experienced declining sentiment from the smart money, it’s easy to see that there were a few funds who sold off their entire stakes last quarter. Intriguingly, D. E. Shaw’s D E Shaw sold off the largest investment of all the hedgies watched by Insider Monkey, totaling close to $0.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $0 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Universal Corp (NYSE:UVV) but similarly valued. We will take a look at Lithium Americas Corp. (NYSE:LAC), The ODP Corporation (NASDAQ:ODP), TPI Composites, Inc. (NASDAQ:TPIC), Covanta Holding Corporation (NYSE:CVA), Malibu Boats Inc (NASDAQ:MBUU), Ferro Corporation (NYSE:FOE), and Comstock Resources Inc (NYSE:CRK). All of these stocks’ market caps are similar to UVV’s market cap.
|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 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $75 million in UVV’s case. Comstock Resources Inc (NYSE:CRK) is the most popular stock in this table. On the other hand Lithium Americas Corp. (NYSE:LAC) is the least popular one with only 3 bullish hedge fund positions. Universal Corp (NYSE:UVV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UVV is 45.4. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on UVV as the stock returned 20.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.