You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Ultrapar Participacoes SA (ADR) (NYSE:UGP) ready to rally soon? Prominent investors are definitely betting on the stock. The number of bullish hedge fund bets that are revealed through the 13F filings strengthened by 3 recently. There were 7 hedge funds in our database with UGP positions at the end of the previous quarter. At the end of this article we will also compare UGP to other stocks including Kimco Realty Corp (NYSE:KIM), Best Buy Co., Inc. (NYSE:BBY), and Fastenal Company (NASDAQ:FAST) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What have hedge funds been doing with Ultrapar Participacoes SA (ADR) (NYSE:UGP)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 43% from the second quarter of 2016. On the other hand, there were a total of 6 hedge funds with a bullish position in UGP at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world has the biggest position in Ultrapar Participacoes SA (ADR) (NYSE:UGP), worth close to $75.9 million. On Renaissance Technologies’ heels is Fisher Asset Management, led by Ken Fisher, which holds a $4.1 million position. Remaining professional money managers that are bullish encompass Israel Englander’s Millennium Management, David Costen Haley’s HBK Investments and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key hedge funds have been driving this bullishness. Millennium Management assembled the largest position in Ultrapar Participacoes SA (ADR) (NYSE:UGP). Millennium Management had $3.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Matthew Hulsizer’s PEAK6 Capital Management, and Louis Navellier’s Navellier & Associates.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ultrapar Participacoes SA (ADR) (NYSE:UGP) but similarly valued. These stocks are Kimco Realty Corp (NYSE:KIM), Best Buy Co., Inc. (NYSE:BBY), Fastenal Company (NASDAQ:FAST), and Cabot Oil & Gas Corporation (NYSE:COG). This group of stocks’ market valuations match UGP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KIM | 11 | 58251 | 4 |
| BBY | 40 | 792943 | 11 |
| FAST | 23 | 624673 | -1 |
| COG | 35 | 1797666 | -1 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $818 million. That figure was $87 million in UGP’s case. Best Buy Co., Inc. (NYSE:BBY) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Ultrapar Participacoes SA (ADR) (NYSE:UGP) is even less popular than KIM. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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