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. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Unitil Corporation (NYSE:UTL).
Unitil Corporation (NYSE:UTL) was in 12 hedge funds’ portfolios at the end of the third quarter of 2019. UTL has seen an increase in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with UTL holdings at the end of the previous quarter. Our calculations also showed that UTL 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a glance at the new hedge fund action encompassing Unitil Corporation (NYSE:UTL).
What does smart money think about Unitil Corporation (NYSE:UTL)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in UTL over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Unitil Corporation (NYSE:UTL) was held by Renaissance Technologies, which reported holding $58.8 million worth of stock at the end of September. It was followed by Impax Asset Management with a $13.5 million position. Other investors bullish on the company included GLG Partners, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Unitil Corporation (NYSE:UTL), around 0.18% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to UTL.
Consequently, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the largest position in Unitil Corporation (NYSE:UTL). Winton Capital Management had $1.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Unitil Corporation (NYSE:UTL) but similarly valued. We will take a look at Kelly Services, Inc. (NASDAQ:KELYA), Continental Building Products Inc (NYSE:CBPX), Seacor Holdings, Inc. (NYSE:CKH), and AnaptysBio, Inc. (NASDAQ:ANAB). This group of stocks’ market caps resemble UTL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KELYA | 13 | 21215 | 3 |
| CBPX | 17 | 81521 | 0 |
| CKH | 13 | 145440 | -1 |
| ANAB | 15 | 329233 | -1 |
| Average | 14.5 | 144352 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $86 million in UTL’s case. Continental Building Products Inc (NYSE:CBPX) is the most popular stock in this table. On the other hand Kelly Services, Inc. (NASDAQ:KELYA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Unitil Corporation (NYSE:UTL) is even less popular than KELYA. Hedge funds dodged a bullet by taking a bearish stance towards UTL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately UTL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); UTL investors were disappointed as the stock returned -3.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
