How do we determine whether UBS Group AG (NYSE:UBS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is UBS Group AG (NYSE:UBS) undervalued? The smart money is becoming more confident. The number of long hedge fund positions rose by 3 lately. Our calculations also showed that UBS isn’t among the 30 most popular stocks among hedge funds (see the video below). UBS was in 14 hedge funds’ portfolios at the end of June. There were 11 hedge funds in our database with UBS holdings at the end of the previous quarter.
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 some fund managers who are betting on Dow reaching 40000 in a year, 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. Let’s review the recent hedge fund action encompassing UBS Group AG (NYSE:UBS).
Hedge fund activity in UBS Group AG (NYSE:UBS)
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UBS over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in UBS Group AG (NYSE:UBS) was held by Fisher Asset Management, which reported holding $605.6 million worth of stock at the end of March. It was followed by Pzena Investment Management with a $91 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Marshall Wace LLP.
As one would reasonably expect, key hedge funds have jumped into UBS Group AG (NYSE:UBS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in UBS Group AG (NYSE:UBS). Marshall Wace LLP had $10.6 million invested in the company at the end of the quarter. Andre F. Perold’s HighVista Strategies also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are David Andre and Astro Teller’s Cerebellum Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as UBS Group AG (NYSE:UBS) but similarly valued. We will take a look at Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Honda Motor Co Ltd (NYSE:HMC), Biogen Inc. (NASDAQ:BIIB), and TC Energy Corporation (NYSE:TRP). This group of stocks’ market valuations resemble UBS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRTX | 40 | 2385510 | -5 |
| HMC | 7 | 83951 | -2 |
| BIIB | 43 | 3521939 | -6 |
| TRP | 12 | 228464 | 0 |
| Average | 25.5 | 1554966 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $1555 million. That figure was $796 million in UBS’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 7 bullish hedge fund positions. UBS Group AG (NYSE:UBS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately UBS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UBS investors were disappointed as the stock returned -4.6% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
