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United Microelectronics Corp (UMC): Are Hedge Funds Right About This Stock?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

Is United Microelectronics Corp (NYSE:UMC) an attractive investment now? Prominent investors are getting more bullish. The number of long hedge fund positions improved by 5 in recent months. Our calculations also showed that UMC isn’t among the 30 most popular stocks among hedge funds. UMC was in 17 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with UMC holdings at the end of the previous quarter.

In the 21st century investor’s toolkit there are dozens of formulas market participants use to analyze stocks. A duo of the most underrated formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can trounce the market by a very impressive margin (see the details here).

Michael Hintze CQS Cayman

Let’s take a glance at the recent hedge fund action regarding United Microelectronics Corp (NYSE:UMC).

Hedge fund activity in United Microelectronics Corp (NYSE:UMC)

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in UMC over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

UMC_dec2018

The largest stake in United Microelectronics Corp (NYSE:UMC) was held by Renaissance Technologies, which reported holding $44.6 million worth of stock at the end of September. It was followed by LMR Partners with a $14.6 million position. Other investors bullish on the company included Arrowstreet Capital, CQS Cayman LP, and OZ Management.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the biggest position in United Microelectronics Corp (NYSE:UMC). LMR Partners had $14.6 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also initiated a $2.2 million position during the quarter. The following funds were also among the new UMC investors: Glenn Russell Dubin’s Highbridge Capital Management, Jeffrey Talpins’s Element Capital Management, and Nick Thakore’s Diametric Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United Microelectronics Corp (NYSE:UMC) but similarly valued. These stocks are Dunkin Brands Group Inc (NASDAQ:DNKN), RealPage, Inc. (NASDAQ:RP), Reliance Steel & Aluminum Co. (NYSE:RS), and Etsy Inc (NASDAQ:ETSY). This group of stocks’ market values are similar to UMC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNKN 12 29779 1
RP 27 424040 -1
RS 27 374418 3
ETSY 32 924716 2
Average 24.5 438238 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $438 million. That figure was $92 million in UMC’s case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Dunkin Brands Group Inc (NASDAQ:DNKN) is the least popular one with only 12 bullish hedge fund positions. United Microelectronics Corp (NYSE:UMC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ETSY might be a better candidate to consider a long position.

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

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