Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Union Pacific Corporation (NYSE:UNP) to find out whether it was one of their high conviction long-term ideas.
Union Pacific Corporation (NYSE:UNP) was included in the equity portfolios of 62 investors from our database at the end of the third quarter of 2016. The company registered an increase in activity from the world’s largest hedge funds during the quarter, as there had been 55 funds with UNP positions at the end of June. At the end of this article we will also compare UNP to other stocks including Westpac Banking Corporation (ADR) (NYSE:WBK), Mondelez International Inc (NASDAQ:MDLZ), and Lowe’s Companies, Inc. (NYSE:LOW) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s take a look at the latest action regarding Union Pacific Corporation (NYSE:UNP).
How have hedgies been trading Union Pacific Corporation (NYSE:UNP)?
Heading into the fourth quarter of 2016, 62 funds tracked by Insider Monkey held long positions in Union Pacific, a change of 13% from the end of the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt, holds the most valuable position in Union Pacific Corporation (NYSE:UNP). Soroban Capital Partners has a $426 million position in the stock, comprising 2.6% of its 13F portfolio. The second most bullish fund manager is Balyasny Asset Management, led by Dmitry Balyasny, which holds a $188.2 million position; 1.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass Zach Schreiber’s Point State Capital, Ken Griffin’s Citadel Investment Group, and Dan Loeb’s Third Point.
As industrywide interest jumped, key money managers have been driving this bullishness. Christopher James’ Partner Fund Management assembled the most valuable position in Union Pacific Corporation (NYSE:UNP). Partner Fund Management had $100.2 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also made a $95.7 million investment in the stock during the quarter. The other funds with brand new UNP positions are Doug Silverman and Alexander Klabin’s Senator Investment Group, Ken Griffin’s Citadel Investment Group, and Robert Pohly’s Samlyn Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Union Pacific Corporation (NYSE:UNP) but similarly valued. We will take a look at Westpac Banking Corporation (ADR) (NYSE:WBK), Mondelez International Inc (NASDAQ:MDLZ), Lowe’s Companies, Inc. (NYSE:LOW), and U.S. Bancorp (NYSE:USB). This group of stocks’ market caps are similar to UNP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBK | 5 | 31922 | -1 |
| MDLZ | 53 | 5902162 | -9 |
| LOW | 68 | 3273484 | 1 |
| USB | 41 | 4631330 | -7 |
As you can see these stocks had an average of 42 funds with bullish positions and the average amount invested in these stocks was $3.46 billion at the end of September. That figure was $2.50 billion in UNP’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table with 68 funds holding shares. On the other hand, Westpac Banking Corporation (ADR) (NYSE:WBK) is the least popular one with only 5 bullish hedge fund positions. Union Pacific Corporation (NYSE:UNP) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Lowe’s Companies, Inc. (NYSE:LOW) might be a better candidate to consider a long position.
