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Were Hedge Funds Right About Dumping United Financial Bancorp, Inc. (UBNK) ?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about United Financial Bancorp, Inc. (NASDAQ:UBNK).

United Financial Bancorp, Inc. (NASDAQ:UBNK) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. UBNK was in 7 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with UBNK holdings at the end of the previous quarter. Our calculations also showed that UBNK isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

D. E. Shaw

Let’s review the latest hedge fund action surrounding United Financial Bancorp, Inc. (NASDAQ:UBNK).

How have hedgies been trading United Financial Bancorp, Inc. (NASDAQ:UBNK)?

At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -46% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in UBNK a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

UBNK_may2019

Among these funds, Renaissance Technologies held the most valuable stake in United Financial Bancorp, Inc. (NASDAQ:UBNK), which was worth $26.3 million at the end of the fourth quarter. On the second spot was Mendon Capital Advisors which amassed $15.6 million worth of shares. Moreover, Castine Capital Management, D E Shaw, and AQR Capital Management were also bullish on United Financial Bancorp, Inc. (NASDAQ:UBNK), allocating a large percentage of their portfolios to this stock.

Since United Financial Bancorp, Inc. (NASDAQ:UBNK) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of all the hedgies watched by Insider Monkey, worth close to $0.7 million in stock. Thomas Bailard’s fund, Bailard Inc, also sold off its stock, about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to United Financial Bancorp, Inc. (NASDAQ:UBNK). We will take a look at AngioDynamics, Inc. (NASDAQ:ANGO), eHealth, Inc. (NASDAQ:EHTH), S.Y. Bancorp, Inc. (NASDAQ:SYBT), and Compass Diversified Holdings LLC (NYSE:CODI). This group of stocks’ market values are similar to UBNK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANGO 12 46572 -3
EHTH 19 239689 0
SYBT 6 9598 -3
CODI 4 3605 0
Average 10.25 74866 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $59 million in UBNK’s case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. United Financial Bancorp, Inc. (NASDAQ:UBNK) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately UBNK wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); UBNK investors were disappointed as the stock returned -8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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