Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at UFP Technologies, Inc. (NASDAQ:UFPT) from the perspective of those elite funds.
Hedge fund interest in UFP Technologies, Inc. (NASDAQ:UFPT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Urovant Sciences Ltd. (NASDAQ:UROV), Cellular Biomedicine Group, Inc. (NASDAQ:CBMG), and WhiteHorse Finance, Inc. (NASDAQ:WHF) to gather more data points. Our calculations also showed that UFPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action encompassing UFP Technologies, Inc. (NASDAQ:UFPT).
How have hedgies been trading UFP Technologies, Inc. (NASDAQ:UFPT)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in UFPT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Cove Street Capital held the most valuable stake in UFP Technologies, Inc. (NASDAQ:UFPT), which was worth $21.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $20.5 million worth of shares. Royce & Associates, Arrowstreet Capital, and Millennium Management 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 Cove Street Capital allocated the biggest weight to UFP Technologies, Inc. (NASDAQ:UFPT), around 3% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to UFPT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Ancora Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as UFP Technologies, Inc. (NASDAQ:UFPT) but similarly valued. We will take a look at Urovant Sciences Ltd. (NASDAQ:UROV), Cellular Biomedicine Group, Inc. (NASDAQ:CBMG), WhiteHorse Finance, Inc. (NASDAQ:WHF), and Fiesta Restaurant Group Inc (NASDAQ:FRGI). All of these stocks’ market caps resemble UFPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UROV | 11 | 41857 | 3 |
| CBMG | 2 | 13955 | 1 |
| WHF | 3 | 3065 | -2 |
| FRGI | 14 | 103176 | 0 |
| Average | 7.5 | 40513 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $47 million in UFPT’s case. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is the most popular stock in this table. On the other hand Cellular Biomedicine Group, Inc. (NASDAQ:CBMG) is the least popular one with only 2 bullish hedge fund positions. UFP Technologies, Inc. (NASDAQ:UFPT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on UFPT as the stock returned 20.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
