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 900 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 Ubiquiti Inc. (NYSE:UI).
Is Ubiquiti Inc. (NYSE:UI) going to take off soon? Money managers were turning bullish. The number of long hedge fund bets increased by 4 recently. Ubiquiti Inc. (NYSE:UI) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. Our calculations also showed that UI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
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. With all of this in mind we’re going to go over the recent hedge fund action surrounding Ubiquiti Inc. (NYSE:UI).
Do Hedge Funds Think UI Is A Good Stock To Buy Now?
At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in UI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Ubiquiti Inc. (NYSE:UI), with a stake worth $157.3 million reported as of the end of June. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $33.7 million. SW Investment Management, Citadel Investment Group, 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 SW Investment Management allocated the biggest weight to Ubiquiti Inc. (NYSE:UI), around 11.94% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 0.55 percent of its 13F equity portfolio to UI.
Consequently, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most outsized position in Ubiquiti Inc. (NYSE:UI). Millennium Management had $12.2 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $5.6 million position during the quarter. The other funds with brand new UI positions are Dmitry Balyasny’s Balyasny Asset Management, Peter Muller’s PDT Partners, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s check out hedge fund activity in other stocks similar to Ubiquiti Inc. (NYSE:UI). We will take a look at Citizens Financial Group Inc (NYSE:CFG), Restaurant Brands International Inc (NYSE:QSR), The Cooper Companies, Inc. (NYSE:COO), Essex Property Trust Inc (NYSE:ESS), Teledyne Technologies Incorporated (NYSE:TDY), ORIX Corporation (NYSE:IX), and Sun Communities Inc (NYSE:SUI). This group of stocks’ market valuations match UI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFG | 36 | 402274 | -5 |
| QSR | 22 | 2007862 | -4 |
| COO | 33 | 1150171 | -10 |
| ESS | 21 | 281090 | -9 |
| TDY | 36 | 1440654 | 5 |
| IX | 4 | 4271 | -1 |
| SUI | 30 | 821616 | -5 |
| Average | 26 | 872563 | -4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $873 million. That figure was $286 million in UI’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Ubiquiti Inc. (NYSE:UI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UI is 62.5. 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. 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 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately UI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UI investors were disappointed as the stock returned -2.2% since the end of June (through 10/22) 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 in 2021.
Follow Ubiquiti Inc. (NYSE:UI)
Follow Ubiquiti Inc. (NYSE:UI)
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Disclosure: None. This article was originally published at Insider Monkey.
