Hedge Funds Are Piling Into Ultratech, Inc. (UTEK): What’s Behind The 55% Surge in Ownership?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Ultratech, Inc. (NASDAQ:UTEK), and what that likely means for the prospects of the company and its stock.

Ultratech, Inc. (NASDAQ:UTEK) was in 17 hedge funds’ portfolios at the end of September. UTEK investors should be aware of an increase in hedge fund interest lately. There were 11 hedge funds in our database with UTEK positions at the end of the previous quarter. At the end of this article we will also compare UTEK to other stocks including tronc Inc (NASDAQ:TRNC), Radware Ltd. (NASDAQ:RDWR), and Atara Biotherapeutics Inc (NASDAQ:ATRA) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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What have hedge funds been doing with Ultratech, Inc. (NASDAQ:UTEK)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a 55% jump from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in UTEK at the beginning of this year, amounting to a nearly 100% jump in hedge fund ownership in 2016. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Carlson Capital, led by Clint Carlson, holds the most valuable position in Ultratech, Inc. (NASDAQ:UTEK). Carlson Capital has a $56 million position in the stock. Sitting at the No. 2 spot is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $28.4 million position. Remaining hedge funds and institutional investors that are bullish include D E Shaw, one of the biggest hedge funds in the world, Ken Hahn’s Quentec Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, key hedge funds were breaking ground themselves. Marshall Wace LLP, led by Paul Marshall and Ian Wace, established the biggest position in Ultratech, Inc. (NASDAQ:UTEK). Marshall Wace LLP had $2 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new UTEK investors: Glenn Russell Dubin’s Highbridge Capital Management, Paul Tudor Jones’ Tudor Investment Corp, and Neil Chriss’ Hutchin Hill Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ultratech, Inc. (NASDAQ:UTEK) but similarly valued. We will take a look at tronc Inc (NASDAQ:TRNC), Radware Ltd. (NASDAQ:RDWR), Atara Biotherapeutics Inc (NASDAQ:ATRA), and Cedar Realty Trust Inc (NYSE:CDR). All of these stocks’ market caps are similar to UTEK’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $139 million in UTEK’s case. tronc Inc (NASDAQ:TRNC) is the most popular stock in this table. On the other hand Cedar Realty Trust Inc (NYSE:CDR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Ultratech, Inc. (NASDAQ:UTEK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None