The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Domtar Corporation (NYSE:UFS) and determine whether the smart money was really smart about this stock.
Is Domtar Corporation (NYSE:UFS) going to take off soon? Prominent investors were getting more bullish. The number of bullish hedge fund positions went up by 9 in recent months. Domtar Corporation (NYSE:UFS) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UFS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 18 hedge funds in our database with UFS positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are over 8000 funds trading today, Our researchers choose to focus on the masters of this club, approximately 850 funds. These hedge fund managers administer the lion’s share of the smart money’s total capital, and by following their first-class stock picks, Insider Monkey has figured out a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s check out the latest hedge fund action surrounding Domtar Corporation (NYSE:UFS).
How have hedgies been trading Domtar Corporation (NYSE:UFS)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in UFS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Domtar Corporation (NYSE:UFS), with a stake worth $32.1 million reported as of the end of September. Trailing AQR Capital Management was Carlson Capital, which amassed a stake valued at $21.7 million. Arrowstreet Capital, Fairpointe Capital, and Point72 Asset 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 Fairpointe Capital allocated the biggest weight to Domtar Corporation (NYSE:UFS), around 1.96% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, designating 0.6 percent of its 13F equity portfolio to UFS.
As aggregate interest increased, key money managers have been driving this bullishness. Fairpointe Capital, managed by Thyra Zerhusen, initiated the largest position in Domtar Corporation (NYSE:UFS). Fairpointe Capital had $13.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $6.8 million position during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Donald Sussman’s Paloma Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Domtar Corporation (NYSE:UFS) but similarly valued. We will take a look at Kaiser Aluminum Corp. (NASDAQ:KALU), Carpenter Technology Corporation (NYSE:CRS), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Seabridge Gold, Inc. (NYSE:SA), Methode Electronics Inc. (NYSE:MEI), SeaWorld Entertainment Inc (NYSE:SEAS), and Hercules Capital Inc (NYSE:HTGC). All of these stocks’ market caps match UFS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KALU | 16 | 62214 | 0 |
| CRS | 16 | 59693 | 0 |
| SASR | 10 | 32787 | -2 |
| SA | 8 | 66024 | 1 |
| MEI | 12 | 83260 | -1 |
| SEAS | 27 | 677043 | 0 |
| HTGC | 15 | 63806 | -1 |
| Average | 14.9 | 149261 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $137 million in UFS’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (NYSE:SA) is the least popular one with only 8 bullish hedge fund positions. Domtar Corporation (NYSE:UFS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UFS is 90. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on UFS as the stock returned 27.2% during Q3 (through September 25th) 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.
