Were Hedge Funds Right About Dumping The Unilever Group (UL)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtThe Unilever Group (NYSE:UL) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

The Unilever Group (NYSE:UL) was in 13 hedge funds’ portfolios at the end of March. UL shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. There were 17 hedge funds in our database with UL holdings at the end of the previous quarter. Our calculations also showed that UL 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 states that banned plastic bags to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the fresh hedge fund action surrounding The Unilever Group (NYSE:UL).

Hedge fund activity in The Unilever Group (NYSE:UL)

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the fourth quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in UL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UL A Good Stock To Buy?

More specifically, Arrowstreet Capital was the largest shareholder of The Unilever Group (NYSE:UL), with a stake worth $107.6 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $43.9 million. D E Shaw, Pittencrieff Partners – Gabalex Capital, and Wallace Capital 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 Pittencrieff Partners – Gabalex Capital allocated the biggest weight to The Unilever Group (NYSE:UL), around 6.53% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, dishing out 2.37 percent of its 13F equity portfolio to UL.

Judging by the fact that The Unilever Group (NYSE:UL) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that elected to cut their entire stakes heading into Q4. Interestingly, Tom Gayner’s Markel Gayner Asset Management dumped the biggest position of all the hedgies watched by Insider Monkey, totaling about $87.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $3.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Unilever Group (NYSE:UL) but similarly valued. These stocks are SAP SE (NYSE:SAP), NIKE, Inc. (NYSE:NKE), salesforce.com, inc. (NYSE:CRM), and Bristol Myers Squibb Company (NYSE:BMY). This group of stocks’ market valuations match UL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAP 15 1386317 -1
NKE 80 2172472 -1
CRM 117 7122915 5
BMY 126 6887128 4
Average 84.5 4392208 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 84.5 hedge funds with bullish positions and the average amount invested in these stocks was $4392 million. That figure was $208 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 15 bullish hedge fund positions. Compared to these stocks The Unilever Group (NYSE:UL) is even less popular than SAP. Hedge funds dodged a bullet by taking a bearish stance towards UL. 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 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately UL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); UL investors were disappointed as the stock returned 12.7% during the second quarter (through June 25th) 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.

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