Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Is United Financial Bancorp, Inc. (NASDAQ:UBNK) a bargain? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions went down by 1 in recent months. Our calculations also showed that UBNK isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a peek at the new hedge fund action regarding United Financial Bancorp, Inc. (NASDAQ:UBNK).
Hedge fund activity in United Financial Bancorp, Inc. (NASDAQ:UBNK)
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UBNK over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in United Financial Bancorp, Inc. (NASDAQ:UBNK) was held by Renaissance Technologies, which reported holding $29.4 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $20 million position. Other investors bullish on the company included Castine Capital Management, Millennium Management, and D E Shaw.
Due to the fact that United Financial Bancorp, Inc. (NASDAQ:UBNK) has experienced declining sentiment from the smart money, it’s safe to say that there exists a select few funds that slashed their entire stakes last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United Financial Bancorp, Inc. (NASDAQ:UBNK) but similarly valued. We will take a look at Adecoagro SA (NYSE:AGRO), Comtech Telecommunications Corp. (NASDAQ:CMTL), Franklin Street Properties Corp. (NYSE:FSP), and Lakeland Bancorp, Inc. (NASDAQ:LBAI). This group of stocks’ market caps are closest to UBNK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGRO | 16 | 188658 | -1 |
| CMTL | 14 | 150226 | -1 |
| FSP | 7 | 23067 | 0 |
| LBAI | 12 | 69869 | 0 |
| Average | 12.25 | 107955 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $66 million in UBNK’s case. Adecoagro SA (NYSE:AGRO) is the most popular stock in this table. On the other hand Franklin Street Properties Corp. (NYSE:FSP) is the least popular one with only 7 bullish hedge fund positions. United Financial Bancorp, Inc. (NASDAQ:UBNK) 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 AGRO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
