We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like United Microelectronics Corporation (NYSE:UMC).
United Microelectronics Corporation (NYSE:UMC) shareholders have witnessed an increase in enthusiasm from smart money of late. Our calculations also showed that UMC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the moguls of this club, around 750 funds. These money managers watch over the lion’s share of the hedge fund industry’s total capital, and by paying attention to their unrivaled equity investments, Insider Monkey has determined a number of investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Michael Hintze of CQS Cayman LP
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s check out the fresh hedge fund action encompassing United Microelectronics Corporation (NYSE:UMC).
Hedge fund activity in United Microelectronics Corporation (NYSE:UMC)
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in UMC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, LMR Partners held the most valuable stake in United Microelectronics Corporation (NYSE:UMC), which was worth $39 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $36.5 million worth of shares. Arrowstreet Capital, CQS Cayman LP, and Sculptor Capital 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 LMR Partners allocated the biggest weight to United Microelectronics Corporation (NYSE:UMC), around 1.93% of its 13F portfolio. CQS Cayman LP is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to UMC.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Marshall Wace, managed by Paul Marshall and Ian Wace, initiated the largest position in United Microelectronics Corporation (NYSE:UMC). Marshall Wace had $0.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.1 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United Microelectronics Corporation (NYSE:UMC) but similarly valued. These stocks are Flowers Foods, Inc. (NYSE:FLO), Generac Holdings Inc. (NYSE:GNRC), Teladoc Health, Inc. (NYSE:TDOC), and JetBlue Airways Corporation (NASDAQ:JBLU). This group of stocks’ market values resemble UMC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLO | 28 | 244376 | 6 |
| GNRC | 30 | 289728 | 5 |
| TDOC | 17 | 102048 | -1 |
| JBLU | 23 | 646872 | -4 |
| Average | 24.5 | 320756 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $98 million in UMC’s case. Generac Holdings Inc. (NYSE:GNRC) is the most popular stock in this table. On the other hand Teladoc Health, Inc. (NYSE:TDOC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks United Microelectronics Corporation (NYSE:UMC) is even less popular than TDOC. Hedge funds clearly dropped the ball on UMC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on UMC as the stock returned 16.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
