We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
United Rentals, Inc. (NYSE:URI) investors should pay attention to an increase in hedge fund sentiment lately. URI was in 54 hedge funds’ portfolios at the end of September. There were 44 hedge funds in our database with URI positions at the end of the previous quarter. Our calculations also showed that URI 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.
William Harnisch of Peconic Partners LLC
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the new hedge fund action encompassing United Rentals, Inc. (NYSE:URI).
What have hedge funds been doing with United Rentals, Inc. (NYSE:URI)?
At the end of the third quarter, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the second quarter of 2019. On the other hand, there were a total of 48 hedge funds with a bullish position in URI a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Lyrical Asset Management was the largest shareholder of United Rentals, Inc. (NYSE:URI), with a stake worth $259.1 million reported as of the end of September. Trailing Lyrical Asset Management was Theleme Partners, which amassed a stake valued at $206.5 million. Citadel Investment Group, Glenview Capital, and Viking Global 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 Red Cedar Management allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 11.39% of its portfolio. Lodge Hill Capital is also relatively very bullish on the stock, earmarking 10.26 percent of its 13F equity portfolio to URI.
As industrywide interest jumped, some big names have jumped into United Rentals, Inc. (NYSE:URI) headfirst. Viking Global, managed by Andreas Halvorsen, established the most valuable position in United Rentals, Inc. (NYSE:URI). Viking Global had $51 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $32.3 million investment in the stock during the quarter. The other funds with new positions in the stock are William Harnisch’s Peconic Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Gregg Moskowitz’s Interval Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Rentals, Inc. (NYSE:URI) but similarly valued. We will take a look at Formula One Group (NASDAQ:FWONK), Avery Dennison Corporation (NYSE:AVY), Vereit Inc (NYSE:VER), and ASE Technology Holding Co., Ltd. (NYSE:ASX). All of these stocks’ market caps resemble URI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FWONK | 30 | 1915502 | -2 |
| AVY | 22 | 125790 | 1 |
| VER | 34 | 613230 | 11 |
| ASX | 8 | 192875 | 0 |
| Average | 23.5 | 711849 | 2.5 |
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 $712 million. That figure was $1124 million in URI’s case. Vereit Inc (NYSE:VER) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks United Rentals, Inc. (NYSE:URI) is more popular among hedge funds. 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 URI as the stock returned 22.8% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
