Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Universal Forest Products, Inc. (NASDAQ:UFPI).
Universal Forest Products, Inc. (NASDAQ:UFPI) was in 17 hedge funds’ portfolios at the end of June. UFPI has experienced a decrease in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with UFPI positions at the end of the previous quarter. Our calculations also showed that UFPI isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the latest hedge fund action encompassing Universal Forest Products, Inc. (NASDAQ:UFPI).
What does smart money think about Universal Forest Products, Inc. (NASDAQ:UFPI)?
At Q2’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in UFPI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of Universal Forest Products, Inc. (NASDAQ:UFPI), with a stake worth $22 million reported as of the end of March. Trailing Fisher Asset Management was SG Capital Management, which amassed a stake valued at $19.5 million. GLG Partners, Citadel Investment Group, and Shellback Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Because Universal Forest Products, Inc. (NASDAQ:UFPI) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of money managers who sold off their entire stakes in the second quarter. It’s worth mentioning that Robert Hockett’s Covalent Capital Partners said goodbye to the biggest position of all the hedgies watched by Insider Monkey, worth about $3 million in stock, and Jeffrey Gendell’s Tontine Asset Management was right behind this move, as the fund dumped about $2.2 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Universal Forest Products, Inc. (NASDAQ:UFPI) but similarly valued. These stocks are CommVault Systems, Inc. (NASDAQ:CVLT), KB Home (NYSE:KBH), First Midwest Bancorp Inc (NASDAQ:FMBI), and Acadia Realty Trust (NYSE:AKR). This group of stocks’ market caps are closest to UFPI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVLT | 19 | 277035 | -10 |
| KBH | 17 | 493163 | -4 |
| FMBI | 14 | 97354 | 1 |
| AKR | 13 | 108818 | 3 |
| Average | 15.75 | 244093 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $64 million in UFPI’s case. CommVault Systems, Inc. (NASDAQ:CVLT) is the most popular stock in this table. On the other hand Acadia Realty Trust (NYSE:AKR) is the least popular one with only 13 bullish hedge fund positions. Universal Forest Products, Inc. (NASDAQ:UFPI) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on UFPI, though not to the same extent, as the stock returned 4.8% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
