Is Union Pacific (UNP) Stock A Buy or Sell?

Is Union Pacific Corporation (NYSE:UNP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is UNP stock a buy or sell? Union Pacific Corporation (NYSE:UNP) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. Union Pacific Corporation (NYSE:UNP) was in 68 hedge funds’ portfolios at the end of December. The all time high for this statistic is 74. Our calculations also showed that UNP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Eric Mandelblatt of Soroban Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind we’re going to take a peek at the recent hedge fund action regarding Union Pacific Corporation (NYSE:UNP).

Do Hedge Funds Think UNP Is A Good Stock To Buy Now?

At Q4’s end, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UNP over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in Union Pacific Corporation (NYSE:UNP), worth close to $893.9 million, corresponding to 0.7% of its total 13F portfolio. The second most bullish fund manager is Soroban Capital Partners, led by Eric W. Mandelblatt and Gaurav Kapadia, holding a $626.5 million position; 4.8% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Aaron Cowen’s Suvretta Capital Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Union Pacific Corporation (NYSE:UNP), around 8.36% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 4.83 percent of its 13F equity portfolio to UNP.

Due to the fact that Union Pacific Corporation (NYSE:UNP) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that elected to cut their positions entirely by the end of the fourth quarter. At the top of the heap, John Armitage’s Egerton Capital Limited dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $619.3 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $4.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 6 funds by the end of the fourth quarter.

Let’s now review hedge fund activity in other stocks similar to Union Pacific Corporation (NYSE:UNP). These stocks are Bristol Myers Squibb Company (NYSE:BMY), Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), Anheuser-Busch InBev SA/NV (NYSE:BUD), JD.Com Inc (NASDAQ:JD), Royal Dutch Shell plc (NYSE:RDS), and Amgen, Inc. (NASDAQ:AMGN). This group of stocks’ market valuations resemble UNP’s market valuation.

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As you can see these stocks had an average of 65.9 hedge funds with bullish positions and the average amount invested in these stocks was $5308 million. That figure was $3539 million in UNP’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 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. Our overall hedge fund sentiment score for UNP is 48.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th and beat the market again by 1.6 percentage points. Unfortunately UNP wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on UNP were disappointed as the stock returned 3.3% since the end of December (through 3/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.