We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Union Pacific Corporation (NYSE:UNP).
Is Union Pacific Corporation (NYSE:UNP) the right investment to pursue these days? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund positions dropped by 6 in recent months. Union Pacific Corporation (NYSE:UNP) was in 69 hedge funds’ portfolios at the end of June. The all time high for this statistic is 75. Our calculations also showed that UNP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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Aaron Cowen of Suvretta Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 let’s take a gander at the new hedge fund action encompassing Union Pacific Corporation (NYSE:UNP).
Do Hedge Funds Think UNP Is A Good Stock To Buy Now?
At the end of June, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. By comparison, 68 hedge funds held shares or bullish call options in UNP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Union Pacific Corporation (NYSE:UNP) was held by TCI Fund Management, which reported holding $1258.3 million worth of stock at the end of June. It was followed by Fisher Asset Management with a $1015.1 million position. Other investors bullish on the company included Soroban Capital Partners, Citadel Investment Group, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Union Pacific Corporation (NYSE:UNP), around 7.57% of its 13F portfolio. Soroban Capital Partners is also relatively very bullish on the stock, earmarking 6.84 percent of its 13F equity portfolio to UNP.
Due to the fact that Union Pacific Corporation (NYSE:UNP) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers who sold off their entire stakes by the end of the second quarter. At the top of the heap, Doug Silverman and Alexander Klabin’s Senator Investment Group dropped the largest investment of the 750 funds watched by Insider Monkey, valued at about $60.6 million in stock, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund cut about $28.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to Union Pacific Corporation (NYSE:UNP). These stocks are Royal Bank of Canada (NYSE:RY), Sea Limited (NYSE:SE), NextEra Energy, Inc. (NYSE:NEE), Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), Amgen, Inc. (NASDAQ:AMGN), and The Charles Schwab Corporation (NYSE:SCHW). This group of stocks’ market caps are similar to UNP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RY | 18 | 905415 | 0 |
| SE | 104 | 12209916 | 6 |
| NEE | 59 | 2686533 | -4 |
| BUD | 18 | 1234449 | 0 |
| BA | 59 | 1368946 | 0 |
| AMGN | 53 | 1651799 | 6 |
| SCHW | 72 | 4851670 | -4 |
| Average | 54.7 | 3558390 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 54.7 hedge funds with bullish positions and the average amount invested in these stocks was $3558 million. That figure was $5035 million in UNP’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. Union Pacific Corporation (NYSE:UNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNP is 56.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately UNP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UNP were disappointed as the stock returned -6.8% since the end of June (through 9/27) 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 many of these stocks already outperformed the market since 2019.
Follow Union Pacific Corp (NYSE:UNP)
Follow Union Pacific Corp (NYSE:UNP)
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Disclosure: None. This article was originally published at Insider Monkey.
