Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
UnitedHealth Group Inc. (NYSE:UNH) has experienced a decrease in support from the world’s most elite money managers in recent months. UNH was in 51 hedge funds’ portfolios at the end of September. There were 61 hedge funds in our database with UNH holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), CVS Caremark Corporation (NYSE:CVS), and Allergan, Inc. (NYSE:AGN) to gather more data points.
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Keeping this in mind, let’s view the fresh action encompassing UnitedHealth Group Inc. (NYSE:UNH).
How are hedge funds trading UnitedHealth Group Inc. (NYSE:UNH)?
At the end of the third quarter, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Boykin Curry’s Eagle Capital Management has the most valuable position in UnitedHealth Group Inc. (NYSE:UNH), worth close to $880.5 million, amounting to 3.9% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $531.2 million position; 1.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Ken Griffin’s Citadel Investment Group, Christopher James’s Partner Fund Management and Phill Gross and Robert Atchinson’s Adage Capital Management.
Seeing as UnitedHealth Group Inc. (NYSE:UNH) has faced declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds that slashed their positions entirely in the third quarter. Intriguingly, Matthew Tewksbury’s Stevens Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, worth about $28.9 million in stock. Michael A. Price and Amos Meron’s fund, Empyrean Capital Partners, also dropped its stock, about $24.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to UnitedHealth Group Inc. (NYSE:UNH). We will take a look at Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), CVS Caremark Corporation (NYSE:CVS), Allergan, Inc. (NYSE:AGN), and Altria Group Inc (NYSE:MO). This group of stocks’ market values resemble UNH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSM | 32 | 1286179 | 5 |
| CVS | 60 | 2210254 | 3 |
| AGN | 151 | 20469067 | 0 |
| MO | 41 | 1626592 | -2 |
As you can see these stocks had an average of 71 hedge funds with bullish positions and the average amount invested in these stocks was $6,398 million. That figure was $2,824 million in UNH’s case. Allergan, Inc. (NYSE:AGN) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) is the least popular one with only 32 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) 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. In this regard AGN might be a better candidate to consider a long position.
