Hedge Funds Aren’t Done Selling United Rentals, Inc. (URI)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of United Rentals, Inc. (NYSE:URI).

Is United Rentals, Inc. (NYSE:URI) a buy right now? The best stock pickers are selling. The number of bullish hedge fund bets dropped by 11 in recent months. Our calculations also showed that URI 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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.

Larry Robbins of Glenview Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the key hedge fund action encompassing United Rentals, Inc. (NYSE:URI).

How are hedge funds trading United Rentals, Inc. (NYSE:URI)?

At the end of the first quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 45 hedge funds with a bullish position in URI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Lyrical Asset Management held the most valuable stake in United Rentals, Inc. (NYSE:URI), which was worth $204.4 million at the end of the third quarter. On the second spot was Theleme Partners which amassed $178.8 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Glenview Capital 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 Theleme Partners allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 12.87% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, earmarking 10.68 percent of its 13F equity portfolio to URI.

Due to the fact that United Rentals, Inc. (NYSE:URI) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Andreas Halvorsen’s Viking Global cut the largest position of the 750 funds tracked by Insider Monkey, totaling about $69.9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dumped about $41.2 million worth. These moves are interesting, as total hedge fund interest was cut by 11 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Rentals, Inc. (NYSE:URI) but similarly valued. These stocks are Sarepta Therapeutics Inc (NASDAQ:SRPT), Brookfield Renewable Partners L.P. (NYSE:BEP), E*TRADE Financial Corporation (NASDAQ:ETFC), and Dropbox, Inc. (NASDAQ:DBX). This group of stocks’ market caps are similar to URI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $713 million. That figure was $752 million in URI’s case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 3 bullish hedge fund positions. United Rentals, Inc. (NYSE:URI) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on URI as the stock returned 35% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.