During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Ultra Petroleum Corp. (NYSE:UPL) and see how the stock is affected by the recent hedge fund activity.
Ultra Petroleum Corp. (NYSE:UPL) was in 19 hedge funds’ portfolios at the end of the third quarter of 2018. UPL investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with UPL positions at the end of the previous quarter. Our calculations also showed that upl isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the new hedge fund action surrounding Ultra Petroleum Corp. (NYSE:UPL).
How are hedge funds trading Ultra Petroleum Corp. (NYSE:UPL)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UPL over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ultra Petroleum Corp. (NYSE:UPL) was held by Fir Tree, which reported holding $40.7 million worth of stock at the end of September. It was followed by Avenue Capital with a $14.2 million position. Other investors bullish on the company included Nokota Management, AQR Capital Management, and Citadel Investment Group.
Due to the fact that Ultra Petroleum Corp. (NYSE:UPL) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds who were dropping their full holdings last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, worth an estimated $2.3 million in stock, and Matthew Halbower’s Pentwater Capital Management was right behind this move, as the fund cut about $1.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ultra Petroleum Corp. (NASDAQ:UPL) but similarly valued. We will take a look at Genesis Healthcare Inc (NYSE:GEN), Ion Geophysical Corp (NYSE:IO), Melinta Therapeutics, Inc. (NASDAQ:MLNT), and Orion Group Holdings, Inc. (NYSE:ORN). This group of stocks’ market valuations are similar to UPL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GEN | 7 | 6095 | -1 |
| IO | 9 | 41107 | -1 |
| MLNT | 9 | 12909 | -1 |
| ORN | 9 | 13134 | -1 |
| Average | 8.5 | 18311 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $71 million in UPL’s case. Ion Geophysical Corp (NYSE:IO) is the most popular stock in this table. On the other hand Genesis Healthcare Inc (NYSE:GEN) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Ultra Petroleum Corp. (NASDAQ:UPL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
