Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
UGI Corp (NYSE:UGI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of the second quarter of 2019. At the end of this article we will also compare UGI to other stocks including Vedanta Ltd (NYSE:VEDL), Bio-Rad Laboratories, Inc. (NYSE:BIO), and Fair Isaac Corporation (NYSE:FICO) to get a better sense of its popularity. Our calculations also showed that UGI isn’t among the 30 most popular stocks among hedge funds (view 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 some fund managers who are betting on Dow reaching 40000 in a year, 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 surrounding UGI Corp (NYSE:UGI).
What does smart money think about UGI Corp (NYSE:UGI)?
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in UGI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in UGI Corp (NYSE:UGI), which was worth $112 million at the end of the second quarter. On the second spot was Diamond Hill Capital which amassed $108.6 million worth of shares. Moreover, AQR Capital Management, Millennium Management, and GLG Partners were also bullish on UGI Corp (NYSE:UGI), allocating a large percentage of their portfolios to this stock.
Due to the fact that UGI Corp (NYSE:UGI) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds that slashed their positions entirely last quarter. At the top of the heap, D. E. Shaw’s D E Shaw dumped the largest stake of the 750 funds followed by Insider Monkey, comprising an estimated $7.8 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund said goodbye to about $2.3 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as UGI Corp (NYSE:UGI) but similarly valued. We will take a look at Vedanta Ltd (NYSE:VEDL), Bio-Rad Laboratories, Inc. (NYSE:BIO), Fair Isaac Corporation (NYSE:FICO), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks’ market valuations are closest to UGI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VEDL | 8 | 53339 | 2 |
| BIO | 36 | 954442 | -1 |
| FICO | 34 | 730765 | 7 |
| BAH | 31 | 369488 | 12 |
| Average | 27.25 | 527009 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $527 million. That figure was $457 million in UGI’s case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 8 bullish hedge fund positions. UGI Corp (NYSE:UGI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately UGI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UGI investors were disappointed as the stock returned -5.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
