Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Uniti Group Inc. (NASDAQ:UNIT) changed recently.
Uniti Group Inc. (NASDAQ:UNIT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Senior Housing Properties Trust (NYSE:SNH), Adtalem Global Education Inc. (NYSE:ATGE), and Taubman Centers, Inc. (NYSE:TCO) to gather more data points.
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’ 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the key hedge fund action regarding Uniti Group Inc. (NASDAQ:UNIT).
How are hedge funds trading Uniti Group Inc. (NASDAQ:UNIT)?
Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in UNIT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Uniti Group Inc. (NASDAQ:UNIT) was held by Elliott Management, which reported holding $133.7 million worth of stock at the end of December. It was followed by Toscafund Asset Management with a $35.2 million position. Other investors bullish on the company included Sylebra Capital Management, Arrowstreet Capital, and HBK Investments.
Seeing as Uniti Group Inc. (NASDAQ:UNIT) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that decided to sell off their full holdings in the third quarter. Interestingly, Stuart J. Zimmer’s Zimmer Partners said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising about $2 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $1.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Uniti Group Inc. (NASDAQ:UNIT) but similarly valued. We will take a look at Senior Housing Properties Trust (NYSE:SNH), Adtalem Global Education Inc. (NYSE:ATGE), Taubman Centers, Inc. (NYSE:TCO), and Manhattan Associates, Inc. (NASDAQ:MANH). All of these stocks’ market caps match UNIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNH | 21 | 84531 | 8 |
| ATGE | 20 | 177763 | 4 |
| TCO | 20 | 170900 | 0 |
| MANH | 20 | 240659 | -3 |
| Average | 20.25 | 168463 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $219 million in UNIT’s case. Senior Housing Properties Trust (NYSE:SNH) is the most popular stock in this table. On the other hand Adtalem Global Education Inc. (NYSE:ATGE) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Uniti Group Inc. (NASDAQ:UNIT) is even less popular than ATGE. Hedge funds dodged a bullet by taking a bearish stance towards UNIT. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately UNIT wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); UNIT investors were disappointed as the stock returned -25% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
