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Should You Buy UBS Group AG (UBS)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of UBS Group AG (NYSE:UBS) based on that data.

UBS Group AG (NYSE:UBS) has experienced an increase in hedge fund sentiment lately. Our calculations also showed that UBS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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. 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 58 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.

Crispin Odey of Odey Asset Management Group

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action regarding UBS Group AG (NYSE:UBS).

How are hedge funds trading UBS Group AG (NYSE:UBS)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UBS over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in UBS Group AG (NYSE:UBS). Renaissance Technologies has a $87.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is Pzena Investment Management, led by Richard S. Pzena, holding a $72.4 million position; 0.5% of its 13F portfolio is allocated to the company. Some other peers that are bullish contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Ken Fisher’s Fisher Asset Management and Crispin Odey’s Odey Asset Management Group. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to UBS Group AG (NYSE:UBS), around 1.82% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, dishing out 0.77 percent of its 13F equity portfolio to UBS.

Now, key money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in UBS Group AG (NYSE:UBS). Marshall Wace LLP had $14.8 million invested in the company at the end of the quarter. Peter S. Stamos’s Stamos Capital also initiated a $1.5 million position during the quarter. The other funds with brand new UBS positions are Mike Vranos’s Ellington and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as UBS Group AG (NYSE:UBS) but similarly valued. We will take a look at ConocoPhillips (NYSE:COP), Roper Technologies Inc. (NYSE:ROP), Sempra Energy (NYSE:SRE), and Analog Devices, Inc. (NASDAQ:ADI). This group of stocks’ market values are similar to UBS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COP 54 961915 -8
ROP 38 1015909 -2
SRE 27 505194 -8
ADI 45 1979695 -6
Average 41 1115678 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1116 million. That figure was $211 million in UBS’s case. ConocoPhillips (NYSE:COP) is the most popular stock in this table. On the other hand Sempra Energy (NYSE:SRE) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks UBS Group AG (NYSE:UBS) is even less popular than SRE. Hedge funds clearly dropped the ball on UBS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on UBS as the stock returned 38% so far in the second quarter and outperformed the market by an even larger margin.

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