Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze United Community Financial Corp (NASDAQ:UCFC) from the perspective of those elite funds.
Hedge fund interest in United Community Financial Corp (NASDAQ:UCFC) shares was flat at the end of last quarter. This is usually a negative indicator. It is important to consider that the shares of the financial company dropped 6.54% during the quarter. In order to find out more about the hedge fund sentiment, we will discuss hedge funds that held positions in United Community Financial Corp (NASDAQ:UCFC), at the end of the last quarter.
At the end of this article, we will also compare United Community Financial Corp (NASDAQ:UCFC) to other stocks, including Tuesday Morning Corporation (NASDAQ:TUES), Synta Pharmaceuticals Corp. (NASDAQ:SNTA), and Casella Waste Systems Inc. (NASDAQ:CWST) to get a better sense of its popularity.
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To the average investor, there are a lot of indicators shareholders put to use to value publicly traded companies. Two of the most underrated indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can outpace the market by a healthy margin (see the details here).
Keeping this in mind, let’s analyze the fresh action surrounding United Community Financial Corp (NASDAQ:UCFC).
What have hedge funds been doing with United Community Financial Corp (NASDAQ:UCFC)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Emanuel J. Friedman’s EJF Capital has the number one position in United Community Financial Corp (NASDAQ:UCFC), worth close to $7.5 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is Elizabeth Park Capital Management, led by Fred Cummings, holding a $5.6 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Renaissance Technologies, Jeffrey Gendell’s Tontine Asset Management, and Neil Chriss’ Hutchin Hill Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically, a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s now take a look at hedge fund activity in other stocks similar to United Community Financial Corp (NASDAQ:UCFC). These stocks are Tuesday Morning Corporation (NASDAQ:TUES), Synta Pharmaceuticals Corp. (NASDAQ:SNTA), Casella Waste Systems Inc. (NASDAQ:CWST), and KEYW Holding Corp. (NASDAQ:KEYW). This group of stocks’ market valuations resemble United Community Financial Corp (NASDAQ:UCFC)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TUES | 13 | 42329 | -3 |
| SNTA | 7 | 4594 | -1 |
| CWST | 14 | 55596 | 1 |
| KEYW | 8 | 5412 | 1 |
As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $23 million in United Community Financial Corp (NASDAQ:UCFC)’s case. Casella Waste Systems Inc. (NASDAQ:CWST) is the most popular stock in this table. On the other hand, Synta Pharmaceuticals Corp. (NASDAQ:SNTA) is the least popular one with only 7 bullish hedge fund positions. United Community Financial Corp (NASDAQ:UCFC) 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. In this regard, Casella Waste Systems Inc. (NASDAQ:CWST) might be a better candidate to consider a long position.