Is Unique Fabricating Inc (UFAB) A Good Stock To Buy?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Unique Fabricating Inc (NYSE:UFAB).

Is UFAB a good stock to buy? Unique Fabricating Inc (NYSE:UFAB) investors should pay attention to an increase in hedge fund interest lately. Unique Fabricating Inc (NYSE:UFAB) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. There were 2 hedge funds in our database with UFAB holdings at the end of December. Our calculations also showed that UFAB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let’s view the fresh hedge fund action surrounding Unique Fabricating Inc (NYSE:UFAB).

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

Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in UFAB a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in Unique Fabricating Inc (NYSE:UFAB). Royce & Associates has a $4.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager of Renaissance Technologies, with a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Unique Fabricating Inc (NYSE:UFAB), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.001 percent of its 13F equity portfolio to UFAB.

Consequently, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Unique Fabricating Inc (NYSE:UFAB). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Unique Fabricating Inc (NYSE:UFAB) but similarly valued. We will take a look at First US Bancshares, Inc. (NASDAQ:FUSB), Navidea Biopharmaceuticals Inc (NYSE:NAVB), Puhui Wealth Investment Management Co., Ltd. (NASDAQ:PHCF), Motus GI Holdings, Inc. (NASDAQ:MOTS), Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC), Hallador Energy Co (NASDAQ:HNRG), and Crown ElectroKinetics Corp. (NASDAQ:CRKN). This group of stocks’ market values are closest to UFAB’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in UFAB’s case. Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC) is the most popular stock in this table. On the other hand First US Bancshares, Inc. (NASDAQ:FUSB) is the least popular one with only 2 bullish hedge fund positions. Unique Fabricating Inc (NYSE:UFAB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UFAB is 29.3. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately UFAB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UFAB investors were disappointed as the stock returned -44.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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