Where Do Hedge Funds Stand On United Fire Group, Inc. (UFCS)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about United Fire Group, Inc. (NASDAQ:UFCS).

United Fire Group, Inc. (NASDAQ:UFCS) investors should be aware of a decrease in support from the world’s most elite money managers recently. United Fire Group, Inc. (NASDAQ:UFCS) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. There were 6 hedge funds in our database with UFCS positions at the end of the fourth quarter. Our calculations also showed that UFCS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the latest hedge fund action surrounding United Fire Group, Inc. (NASDAQ:UFCS).

Do Hedge Funds Think UFCS Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in UFCS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in United Fire Group, Inc. (NASDAQ:UFCS), which was worth $17.7 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $2.4 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and Millennium 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 Royce & Associates allocated the biggest weight to United Fire Group, Inc. (NASDAQ:UFCS), around 0.12% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.0033 percent of its 13F equity portfolio to UFCS.

Due to the fact that United Fire Group, Inc. (NASDAQ:UFCS) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that slashed their full holdings last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest stake of the 750 funds followed by Insider Monkey, comprising close to $0.6 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to United Fire Group, Inc. (NASDAQ:UFCS). These stocks are Village Farms International, Inc. (NASDAQ:VFF), Mohawk Group Holdings, Inc. (NASDAQ:MWK), Hanger, Inc. (NYSE:HNGR), Amphastar Pharmaceuticals Inc (NASDAQ:AMPH), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), Natus Medical Inc (NASDAQ:NTUS), and State Auto Financial Corporation (NASDAQ:STFC). All of these stocks’ market caps resemble UFCS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $23 million in UFCS’s case. Natus Medical Inc (NASDAQ:NTUS) is the most popular stock in this table. On the other hand Village Farms International, Inc. (NASDAQ:VFF) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks United Fire Group, Inc. (NASDAQ:UFCS) is even less popular than VFF. Our overall hedge fund sentiment score for UFCS is 16.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards UFCS. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately UFCS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); UFCS investors were disappointed as the stock returned -21.4% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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