Should I Avoid Unifi, Inc. (UFI)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Unifi, Inc. (NYSE:UFI) changed recently.

Is Unifi, Inc. (NYSE:UFI) a buy right now? Investors who are in the know were in a pessimistic mood. The number of long hedge fund positions were trimmed by 3 in recent months. Unifi, Inc. (NYSE:UFI) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 16. Our calculations also showed that UFI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.


Jeffrey Ubben of ValueAct Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a look at the latest hedge fund action regarding Unifi, Inc. (NYSE:UFI).

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

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards UFI over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Impala Asset Management was the largest shareholder of Unifi, Inc. (NYSE:UFI), with a stake worth $36.3 million reported as of the end of June. Trailing Impala Asset Management was Inclusive Capital, which amassed a stake valued at $34.5 million. Royce & Associates, Roubaix Capital, 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 Inclusive Capital allocated the biggest weight to Unifi, Inc. (NYSE:UFI), around 3.2% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, setting aside 2.42 percent of its 13F equity portfolio to UFI.

Due to the fact that Unifi, Inc. (NYSE:UFI) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes heading into Q3. At the top of the heap, Ken Grossman and Glen Schneider’s SG Capital Management said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $2.7 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also said goodbye to its stock, about $0.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Unifi, Inc. (NYSE:UFI). We will take a look at Star Group L.P. (NYSE:SGU), Miller Industries, Inc. (NYSE:MLR), Donegal Group Inc (NASDAQ:DGICA), Gritstone bio, Inc. (NASDAQ:GRTS), Geron Corporation (NASDAQ:GERN), MetroCity Bankshares, Inc. (NASDAQ:MCBS), and Haynes International, Inc. (NASDAQ:HAYN). This group of stocks’ market caps are similar to UFI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SGU 11 67913 5
MLR 10 71602 3
DGICA 11 15660 2
GRTS 17 119862 3
GERN 8 47005 -1
MCBS 4 964 1
HAYN 9 66228 -2
Average 10 55605 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $102 million in UFI’s case. Gritstone bio, Inc. (NASDAQ:GRTS) is the most popular stock in this table. On the other hand MetroCity Bankshares, Inc. (NASDAQ:MCBS) is the least popular one with only 4 bullish hedge fund positions. Unifi, Inc. (NYSE:UFI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UFI is 43.8. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately UFI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UFI investors were disappointed as the stock returned -5.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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