Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Under Armour Inc (NYSE:UA).
Under Armour Inc was in 23 hedge funds’ portfolios at the end of September. UA has seen a decrease in hedge fund interest recently. There were 27 hedge funds in our database with UA holdings at the end of the previous quarter. At the end of this article we will also compare UA to other stocks including TD Ameritrade Holding Corp. (NYSE:AMTD), HCP, Inc. (NYSE:HCP), and Paychex, Inc. (NASDAQ:PAYX) to get a better sense of its popularity.
Follow Under Armour Inc. (NYSE:UA)
Follow Under Armour Inc. (NYSE:UA)
To the average investor there are a lot of metrics stock traders use to analyze stocks. Two of the most underrated metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the market by a significant margin (see the details here).
With all of this in mind, we’re going to take a look at the latest action surrounding Under Armour Inc (NYSE:UA).
What does the smart money think about Under Armour Inc (NYSE:UA)?
Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 15% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Clifford Fox’s Columbus Circle Investors has the number one position in Under Armour Inc (NYSE:UA), worth close to $193.7 million, comprising 1.6% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $27.1 million call position; less than 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism consist of Stanley Druckenmiller’s Duquesne Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and D. E. Shaw’s D E Shaw.
Because Under Armour Inc (NYSE:UA) has witnessed bearish sentiment from hedge fund managers, we can see that there was a specific group of hedgies that elected to cut their full holdings in the third quarter. It’s worth mentioning that Curtis Macnguyen’s Ivory Capital (Investment Mgmt) cut the largest position of all the hedgies monitored by Insider Monkey, valued at about $25 million in stock, and Michael Hintze’s CQS Cayman LP was right behind this move, as the fund said goodbye to about $4.9 million worth of UA shares. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Under Armour Inc (NYSE:UA) but similarly valued. These stocks are TD Ameritrade Holding Corp. (NYSE:AMTD), HCP, Inc. (NYSE:HCP), Paychex, Inc. (NASDAQ:PAYX), and Potash Corp./Saskatchewan (USA) (NYSE:POT). This group of stocks’ market valuations are closest to UA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMTD | 19 | 476190 | -2 |
| HCP | 17 | 265362 | -2 |
| PAYX | 22 | 485273 | -9 |
| POT | 31 | 822713 | 1 |
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was just $364 million in UA’s case. Potash Corp./Saskatchewan (USA) (NYSE:POT) is the most popular stock in this table. On the other hand HCP, Inc. (NYSE:HCP) is the least popular one with only 17 bullish hedge fund positions. Under Armour Inc (NYSE:UA) is not the most popular stock in this group, but hedge fund interest is still above average. While this is a slightly positive signal, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard POT might be a better candidate to consider a long position.
