How Smart Money Is Trading United Therapeutics Corporation (UTHR)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at United Therapeutics Corporation (NASDAQ:UTHR) from the perspective of those elite funds.

United Therapeutics Corporation (NASDAQ:UTHR) has experienced a decrease in activity from the world’s largest hedge funds lately. The stock was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. In comparison, there were 41 hedge funds in our database with UTHR positions at the end of the previous quarter. 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 Flextronics International Ltd. (NASDAQ:FLEX), Xylem Inc (NYSE:XYL), and SVB Financial Group (NASDAQ:SIVB) to gather more data points.

At the moment there are a large number of methods market participants use to value their holdings. A duo of the most useful methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the S&P 500 by a superb amount (see the details here).

Keeping this in mind, let’s go over the new action encompassing United Therapeutics Corporation (NASDAQ:UTHR).

How have hedgies been trading United Therapeutics Corporation (NASDAQ:UTHR)?

At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 17% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Matt Sirovich and Jeremy Mindich’s Scopia Capital has the number one position in United Therapeutics Corporation (NASDAQ:UTHR), worth close to $373.5 million, corresponding to 8% of its total 13F portfolio. Sitting at the No. 2 spot is Iridian Asset Management, run by David Cohen and Harold Levy, which holds a $258.7 million position; 2.2% of its 13F portfolio is allocated to the stock. Other members of the smart money community that hold long positions comprise William Leland Edwards’s Palo Alto Investors, Cliff Asness’s AQR Capital Management and Jim Simons’s Renaissance Technologies.

Because United Therapeutics Corporation (NASDAQ:UTHR) has faced falling interest from the smart money, it’s easy to see that there were a few money managers who sold off their positions entirely in the third quarter. It’s worth mentioning that Mitchell Blutt’s Consonance Capital Management dumped the largest position of all the hedgies watched by Insider Monkey, totaling close to $67.4 million in stock, while Zach Schreiber of Point State Capital was right behind this move, as the fund sold off about $47.8 million worth of UTHR shares. These transactions are important to note, as aggregate hedge fund interest was cut by 7 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. We will take a look at Flextronics International Ltd. (NASDAQ:FLEX), Xylem Inc (NYSE:XYL), SVB Financial Group (NASDAQ:SIVB), and Macquarie Infrastructure Company LLC (NYSE:MIC). This group of stocks’ market caps are similar to UTHR’s market cap.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $923 million. That figure was $1.59 billion in UTHR’s case, which is a positive sign. Macquarie Infrastructure Company LLC (NYSE:MIC) is the most popular stock in this table, while Xylem Inc (NYSE:XYL) is at the other end of the specter, with only 23 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) 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. In this regard MIC might be a better candidate to consider a long position.