How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding UGI Corp (NYSE:UGI).
UGI Corp (NYSE:UGI) has seen an increase in hedge fund sentiment of late. UGI Corp (NYSE:UGI) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that UGI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Fred DiSanto of Ancora Advisors
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 take a gander at the new hedge fund action regarding UGI Corp (NYSE:UGI).
Do Hedge Funds Think UGI Is A Good Stock To Buy Now?
At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UGI over the last 24 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in UGI Corp (NYSE:UGI), which was worth $126.8 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $29.2 million worth of shares. Citadel Investment Group, Aequim Alternative Investments, and Ancora Advisors 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 Aequim Alternative Investments allocated the biggest weight to UGI Corp (NYSE:UGI), around 0.69% of its 13F portfolio. Coe Capital Management is also relatively very bullish on the stock, setting aside 0.52 percent of its 13F equity portfolio to UGI.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in UGI Corp (NYSE:UGI). Citadel Investment Group had $17 million invested in the company at the end of the quarter. Franklin Parlamis’s Aequim Alternative Investments also initiated a $16 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Highbridge Capital Management, and Andrew Weiss’s Weiss Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as UGI Corp (NYSE:UGI) but similarly valued. These stocks are Credicorp Ltd. (NYSE:BAP), The Middleby Corporation (NASDAQ:MIDD), First Solar, Inc. (NASDAQ:FSLR), Vertiv Holdings Co (NYSE:VRT), Reliance Steel & Aluminum Co. (NYSE:RS), NiSource Inc. (NYSE:NI), and Western Alliance Bancorporation (NYSE:WAL). All of these stocks’ market caps are similar to UGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BAP | 19 | 233067 | -3 |
| MIDD | 35 | 821535 | 7 |
| FSLR | 31 | 317049 | 7 |
| VRT | 36 | 904262 | -3 |
| RS | 27 | 273896 | 9 |
| NI | 36 | 559849 | 8 |
| WAL | 28 | 188070 | 5 |
| Average | 30.3 | 471104 | 4.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $275 million in UGI’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 19 bullish hedge fund positions. UGI Corp (NYSE:UGI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UGI is 46.3. 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 UGI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UGI investors were disappointed as the stock returned -3.5% 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 Ugi Corp (NYSE:UGI)
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Disclosure: None. This article was originally published at Insider Monkey.
