We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of United Community Banks Inc (NASDAQ:UCBI) based on that data.
Is United Community Banks Inc (NASDAQ:UCBI) going to take off soon? The smart money is buying. The number of bullish hedge fund positions increased by 3 lately. Our calculations also showed that UCBI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). UCBI was in 16 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with UCBI holdings at the end of the previous quarter.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the new hedge fund action regarding United Community Banks Inc (NASDAQ:UCBI).
Hedge fund activity in United Community Banks Inc (NASDAQ:UCBI)
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the third quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in UCBI a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of United Community Banks Inc (NASDAQ:UCBI), with a stake worth $29.4 million reported as of the end of September. Trailing Renaissance Technologies was Elizabeth Park Capital Management, which amassed a stake valued at $8.3 million. GLG Partners, D E Shaw, and Mendon Capital Advisors 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 Elizabeth Park Capital Management allocated the biggest weight to United Community Banks Inc (NASDAQ:UCBI), around 3.24% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, dishing out 0.36 percent of its 13F equity portfolio to UCBI.
As one would reasonably expect, key money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most outsized position in United Community Banks Inc (NASDAQ:UCBI). Laurion Capital Management had $0.5 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Community Banks Inc (NASDAQ:UCBI) but similarly valued. We will take a look at LexinFintech Holdings Ltd. (NASDAQ:LX), Xenia Hotels & Resorts Inc (NYSE:XHR), Afya Limited (NASDAQ:AFYA), and Arco Platform Limited (NASDAQ:ARCE). All of these stocks’ market caps resemble UCBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LX | 13 | 117071 | -2 |
| XHR | 11 | 45672 | 2 |
| AFYA | 9 | 55035 | 2 |
| ARCE | 17 | 169461 | 5 |
| Average | 12.5 | 96810 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $57 million in UCBI’s case. Arco Platform Limited (NASDAQ:ARCE) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 9 bullish hedge fund positions. United Community Banks Inc (NASDAQ:UCBI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately UCBI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UCBI were disappointed as the stock returned -42.2% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
