Hedge Funds Are Dumping UIL Holdings Corporation (UIL)

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Despite a 3.72% dividend yield and a bullish analyst sentiment, the funds from our database seem to be losing interest in UIL Holdings Corporation (NYSE:UIL) as the number of long hedge fund bets dropped by 3 in recent months. 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 CAE, Inc. (USA) (NYSE:CAE), AU Optronics Corp. (ADR) (NYSE:AUO), and NorthStar Asset Management Group Inc (NYSE:NSAM) to gather more data points.

At the moment there are many formulas stock traders have at their disposal to evaluate publicly traded companies. A pair of the best formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the S&P 500 by a very impressive amount (see the details here).

Now, let’s analyze the latest action regarding UIL Holdings Corporation (NYSE:UIL).

What have hedge funds been doing with UIL Holdings Corporation (NYSE:UIL)?

At the Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 23% from the second quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, David Einhorn’s Greenlight Capital has the largest position in UIL Holdings Corporation (NYSE:UIL), worth close to $263.9 million, amounting to 4.4% of its total 13F portfolio. Sitting at the No. 2 spot is Farallon Capital, led by Thomas Steyer, holding a $47.5 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Jim Simons’ Renaissance Technologies, and Cliff Asness’ AQR Capital Management.

Seeing as UIL Holdings Corporation (NYSE:UIL) has witnessed a declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Matthew Mark’s Jet Capital Investors dropped the largest stake of the 700 funds tracked by Insider Monkey, worth close to $22.9 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also dropped its stock, about $0.6 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as UIL Holdings Corporation (NYSE:UIL) but similarly valued. These stocks are CAE, Inc. (USA) (NYSE:CAE), AU Optronics Corp. (ADR) (NYSE:AUO), NorthStar Asset Management Group Inc (NYSE:NSAM), and J.C. Penney Company, Inc. (NYSE:JCP). All of these stocks’ market caps are similar to UIL’s market cap.

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 $458 million. That figure was $372 million in UIL’s case. NorthStar Asset Management Group Inc (NYSE:NSAM) is the most popular stock in this table. On the other hand CAE, Inc. (USA) (NYSE:CAE) is the least popular one with only 6 bullish hedge fund positions. UIL Holdings Corporation (NYSE:UIL) 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 NSAM might be a better candidate to consider a long position.