Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 years and analyze what the smart money thinks of United Fire Group, Inc. (NASDAQ:UFCS) based on that data.
United Fire Group, Inc. (NASDAQ:UFCS) has experienced a decrease in activity from the world’s largest hedge funds lately. UFCS was in 6 hedge funds’ portfolios at the end of December. There were 9 hedge funds in our database with UFCS positions at the end of the previous quarter. Our calculations also showed that UFCS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing United Fire Group, Inc. (NASDAQ:UFCS).
What have hedge funds been doing with United Fire Group, Inc. (NASDAQ:UFCS)?
At Q4’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in UFCS a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in United Fire Group, Inc. (NASDAQ:UFCS), which was worth $7.6 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.8 million worth of shares. Two Sigma Advisors, AQR Capital Management, and Millennium Management 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 Winton Capital Management allocated the biggest weight to United Fire Group, Inc. (NASDAQ:UFCS), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to UFCS.
Because United Fire Group, Inc. (NASDAQ:UFCS) has faced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that slashed their positions entirely last quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $0.5 million in stock. Bruce Kovner’s fund, Caxton Associates LP, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United Fire Group, Inc. (NASDAQ:UFCS) but similarly valued. We will take a look at Opera Limited (NASDAQ:OPRA), Mesa Laboratories, Inc. (NASDAQ:MLAB), Playa Hotels & Resorts N.V. (NASDAQ:PLYA), and iHeartMedia, Inc. (NASDAQ:IHRT). This group of stocks’ market caps are closest to UFCS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OPRA | 15 | 22844 | 2 |
| MLAB | 10 | 110335 | 1 |
| PLYA | 18 | 506471 | 1 |
| IHRT | 31 | 221245 | 5 |
| Average | 18.5 | 215224 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $11 million in UFCS’s case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand Mesa Laboratories, Inc. (NASDAQ:MLAB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks United Fire Group, Inc. (NASDAQ:UFCS) is even less popular than MLAB. Hedge funds dodged a bullet by taking a bearish stance towards UFCS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately UFCS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); UFCS investors were disappointed as the stock returned -37.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
