Is Ultra Clean Holdings Inc (NASDAQ:UCTT) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Ultra Clean Holdings Inc (NASDAQ:UCTT) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that UCTT 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 21st century investor’s toolkit there are plenty of gauges market participants use to value their stock investments. Two of the less known gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a solid amount (see the details here).
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action surrounding Ultra Clean Holdings Inc (NASDAQ:UCTT).
What have hedge funds been doing with Ultra Clean Holdings Inc (NASDAQ:UCTT)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in UCTT over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steven Baughman’s Divisar Capital has the largest position in Ultra Clean Holdings Inc (NASDAQ:UCTT), worth close to $28.9 million, amounting to 9.6% of its total 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $20.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Israel Englander’s Millennium Management, and Josh Goldberg’s G2 Investment Partners Management. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Ultra Clean Holdings Inc (NASDAQ:UCTT), around 9.6% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, setting aside 2.28 percent of its 13F equity portfolio to UCTT.
Consequently, key money managers have jumped into Ultra Clean Holdings Inc (NASDAQ:UCTT) headfirst. G2 Investment Partners Management, managed by Josh Goldberg, established the biggest position in Ultra Clean Holdings Inc (NASDAQ:UCTT). G2 Investment Partners Management had $2.4 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also made a $1.5 million investment in the stock during the quarter. The only other fund with a brand new UCTT position is John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ultra Clean Holdings Inc (NASDAQ:UCTT) but similarly valued. We will take a look at First Mid Bancshares, Inc. (NASDAQ:FMBH), Tucows Inc. (NASDAQ:TCX), Accel Entertainment, Inc. (NYSE:TPGH), and Modine Manufacturing Company (NYSE:MOD). This group of stocks’ market values are similar to UCTT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMBH | 5 | 11001 | 2 |
| TCX | 6 | 37855 | -2 |
| TPGH | 21 | 184285 | 2 |
| MOD | 18 | 66235 | -2 |
| Average | 12.5 | 74844 | 0 |
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 $75 million. That figure was $65 million in UCTT’s case. Accel Entertainment, Inc. (NYSE:TPGH) is the most popular stock in this table. On the other hand First Mid Bancshares, Inc. (NASDAQ:FMBH) is the least popular one with only 5 bullish hedge fund positions. Ultra Clean Holdings Inc (NASDAQ:UCTT) 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 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 UCTT as the stock returned 51.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
