In this article we will check out the progression of hedge fund sentiment towards UMB Financial Corporation (NASDAQ:UMBF) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is UMB Financial Corporation (NASDAQ:UMBF) a first-rate stock to buy now? Money managers are in a pessimistic mood. The number of bullish hedge fund positions went down by 4 lately. Our calculations also showed that UMBF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). UMBF was in 15 hedge funds’ portfolios at the end of March. There were 19 hedge funds in our database with UMBF holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Martin Whitman of Third Avenue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest remote jobs that pay well to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding UMB Financial Corporation (NASDAQ:UMBF).
Hedge fund activity in UMB Financial Corporation (NASDAQ:UMBF)
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UMBF over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in UMB Financial Corporation (NASDAQ:UMBF), which was worth $13.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.7 million worth of shares. Third Avenue Management, Citadel Investment Group, and GLG Partners 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 Third Avenue Management allocated the biggest weight to UMB Financial Corporation (NASDAQ:UMBF), around 1% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to UMBF.
Judging by the fact that UMB Financial Corporation (NASDAQ:UMBF) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that slashed their full holdings in the first quarter. Intriguingly, Brandon Haley’s Holocene Advisors sold off the biggest investment of all the hedgies watched by Insider Monkey, totaling an estimated $1.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks similar to UMB Financial Corporation (NASDAQ:UMBF). We will take a look at Alkermes Plc (NASDAQ:ALKS), Teradata Corporation (NYSE:TDC), MGE Energy, Inc. (NASDAQ:MGEE), and Ra Pharmaceuticals, Inc. (NASDAQ:RARX). This group of stocks’ market valuations are similar to UMBF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALKS | 30 | 509143 | -3 |
| TDC | 24 | 171880 | -4 |
| MGEE | 6 | 38970 | -3 |
| RARX | 34 | 890266 | 6 |
| Average | 23.5 | 402565 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $403 million. That figure was $46 million in UMBF’s case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 6 bullish hedge fund positions. UMB Financial Corporation (NASDAQ:UMBF) 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. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately UMBF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UMBF investors were disappointed as the stock returned 8.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
