Were Hedge Funds Right About Buying United Technologies Corporation (UTX)?

Is United Technologies Corporation (NYSE:UTX) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

United Technologies Corporation (NYSE:UTX) shareholders have witnessed an increase in hedge fund sentiment of late. UTX was in 64 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 59 hedge funds in our database with UTX holdings at the end of the previous quarter. Our calculations also showed that UTX isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Let’s go over the key hedge fund action surrounding United Technologies Corporation (NYSE:UTX).

How are hedge funds trading United Technologies Corporation (NYSE:UTX)?

At Q4’s end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2018. By comparison, 50 hedge funds held shares or bullish call options in UTX a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).


More specifically, Viking Global was the largest shareholder of United Technologies Corporation (NYSE:UTX), with a stake worth $743.6 million reported as of the end of September. Trailing Viking Global was Pershing Square, which amassed a stake valued at $594 million. Fisher Asset Management, Soroban Capital Partners, and First Pacific Advisors LLC were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, some big names have jumped into United Technologies Corporation (NYSE:UTX) headfirst. Pentwater Capital Management, managed by Matthew Halbower, established the most outsized position in United Technologies Corporation (NYSE:UTX). Pentwater Capital Management had $42.1 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann’s TIG Advisors also made a $10.6 million investment in the stock during the quarter. The following funds were also among the new UTX investors: Frank Brosens’s Taconic Capital, Matthew Tewksbury’s Stevens Capital Management, and David Simon’s Twin Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United Technologies Corporation (NYSE:UTX) but similarly valued. We will take a look at Toronto-Dominion Bank (NYSE:TD), Texas Instruments Incorporated (NASDAQ:TXN), Thermo Fisher Scientific Inc. (NYSE:TMO), and Costco Wholesale Corporation (NASDAQ:COST). This group of stocks’ market valuations match UTX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TD 17 887418 -3
TXN 44 2402004 -4
TMO 67 3829829 11
COST 48 3254890 9
Average 44 2593535 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2594 million. That figure was $5060 million in UTX’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 17 bullish hedge fund positions. United Technologies Corporation (NYSE:UTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on UTX as the stock returned 19% and outperformed the market as well.

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