Were Hedge Funds Right About United Rentals, Inc. (URI)?

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 first 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 4.5 years and analyze what the smart money thinks of United Rentals, Inc. (NYSE:URI) based on that data and determine whether they were really smart about the stock.

Is United Rentals, Inc. (NYSE:URI) going to take off soon? Investors who are in the know were getting less optimistic. The number of bullish hedge fund bets were trimmed by 11 recently. Our calculations also showed that URI 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). URI was in 43 hedge funds’ portfolios at the end of the first quarter of 2020. There were 54 hedge funds in our database with URI holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are viewed as slow, outdated investment tools of years past. While there are over 8000 funds trading at the moment, Our experts look at the elite of this group, approximately 850 funds. Most estimates calculate that this group of people shepherd the lion’s share of all hedge funds’ total capital, and by observing their best equity investments, Insider Monkey has uncovered many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Larry Robbins of Glenview Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. With all of this in mind we’re going to check out the latest hedge fund action surrounding United Rentals, Inc. (NYSE:URI).

How have hedgies been trading United Rentals, Inc. (NYSE:URI)?

At Q1’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in URI over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the number one position in United Rentals, Inc. (NYSE:URI), worth close to $204.4 million, amounting to 5% of its total 13F portfolio. The second largest stake is held by Theleme Partners, led by Patrick Degorce, holding a $178.8 million position; 12.9% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Larry Robbins’s Glenview Capital. In terms of the portfolio weights assigned to each position Theleme Partners allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 12.87% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, earmarking 10.68 percent of its 13F equity portfolio to URI.

Due to the fact that United Rentals, Inc. (NYSE:URI) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, Andreas Halvorsen’s Viking Global said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $69.9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $41.2 million worth. These moves are important to note, as total hedge fund interest was cut by 11 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United Rentals, Inc. (NYSE:URI) but similarly valued. We will take a look at Sarepta Therapeutics Inc (NASDAQ:SRPT), Brookfield Renewable Partners L.P. (NYSE:BEP), E*TRADE Financial Corporation (NASDAQ:ETFC), and Dropbox, Inc. (NASDAQ:DBX). All of these stocks’ market caps match URI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRPT 33 905750 -9
BEP 3 18840 -1
ETFC 37 941990 -11
DBX 44 985316 -2
Average 29.25 712974 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $713 million. That figure was $752 million in URI’s case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 3 bullish hedge fund positions. United Rentals, Inc. (NYSE:URI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on URI as the stock returned 44.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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