Unilever PLC (UL) Fell Out Of Favor With Hedge Funds

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 Unilever PLC (NYSE:UL) changed recently.

Is Unilever PLC (NYSE:UL) a buy, sell, or hold? Money managers were turning less bullish. The number of bullish hedge fund bets went down by 5 lately. Unilever PLC (NYSE:UL) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that UL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 25 hedge funds in our database with UL holdings at the end of December.

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Unilever PLC (NYSE:UL).

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

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in UL a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Gardner Russo & Gardner was the largest shareholder of Unilever PLC (NYSE:UL), with a stake worth $560.3 million reported as of the end of March. Trailing Gardner Russo & Gardner was Fisher Asset Management, which amassed a stake valued at $78.1 million. Scopus Asset Management, Citadel Investment Group, and D E Shaw 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 Pittencrieff Partners – Gabalex Capital allocated the biggest weight to Unilever PLC (NYSE:UL), around 5.64% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, dishing out 5.11 percent of its 13F equity portfolio to UL.

Judging by the fact that Unilever PLC (NYSE:UL) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Rajiv Jain’s GQG Partners dumped the largest position of the 750 funds followed by Insider Monkey, valued at about $15.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $4.3 million worth. These moves are important to note, as total hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Unilever PLC (NYSE:UL). We will take a look at Linde plc (NYSE:LIN), BHP Group (NYSE:BBL), Morgan Stanley (NYSE:MS), SAP SE (NYSE:SAP), Amgen, Inc. (NASDAQ:AMGN), HDFC Bank Limited (NYSE:HDB), and Bristol Myers Squibb Company (NYSE:BMY). This group of stocks’ market values match UL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LIN 43 4636270 -7
BBL 23 1353821 5
MS 79 5285168 13
SAP 19 1473996 5
AMGN 47 1001957 -2
HDB 27 1964796 -4
BMY 81 5037397 -50
Average 45.6 2964772 -5.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $2965 million. That figure was $827 million in UL’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 19 bullish hedge fund positions. Unilever PLC (NYSE:UL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UL is 24.8. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately UL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UL investors were disappointed as the stock returned 8.7% since the end of March (through 7/16) 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.