Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
United Bankshares, Inc. (NASDAQ:UBSI) has experienced an increase in enthusiasm from smart money in recent months. Our calculations also showed that UBSI isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the latest hedge fund action regarding United Bankshares, Inc. (NASDAQ:UBSI).
Hedge fund activity in United Bankshares, Inc. (NASDAQ:UBSI)
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in UBSI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Basswood Capital, managed by Matthew Lindenbaum, holds the largest position in United Bankshares, Inc. (NASDAQ:UBSI). Basswood Capital has a $6.7 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Noam Gottesman of GLG Partners, with a $4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass D. E. Shaw’s D E Shaw, Dmitry Balyasny’s Balyasny Asset Management and Israel Englander’s Millennium Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in United Bankshares, Inc. (NASDAQ:UBSI). Balyasny Asset Management had $3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Steve Cohen’s Point72 Asset Management, and Cliff Asness’s AQR Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United Bankshares, Inc. (NASDAQ:UBSI) but similarly valued. These stocks are China Biologic Products Holdings, Inc. (NASDAQ:CBPO), Tech Data Corporation (NASDAQ:TECD), Azul S.A. (NYSE:AZUL), and Embraer SA (NYSE:ERJ). All of these stocks’ market caps match UBSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBPO | 9 | 144845 | 1 |
| TECD | 18 | 281786 | -1 |
| AZUL | 13 | 173988 | 1 |
| ERJ | 7 | 50753 | -1 |
| Average | 11.75 | 162843 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $27 million in UBSI’s case. Tech Data Corporation (NASDAQ:TECD) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 7 bullish hedge fund positions. United Bankshares, Inc. (NASDAQ:UBSI) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on UBSI, though not to the same extent, as the stock returned 3% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
