Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards United Community Banks Inc (NASDAQ:UCBI) to find out whether it was one of their high conviction long-term ideas.
United Community Banks Inc (NASDAQ:UCBI) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. UCBI was in 15 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with UCBI holdings at the end of the previous quarter. Our calculations also showed that ucbi isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the fresh hedge fund action surrounding United Community Banks Inc (NASDAQ:UCBI).
Hedge fund activity in United Community Banks Inc (NASDAQ:UCBI)
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UCBI over the last 15 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of United Community Banks Inc (NASDAQ:UCBI), with a stake worth $32.1 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $6.8 million. D E Shaw, Mendon Capital Advisors, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Weld Capital Management, managed by Minhua Zhang, assembled the most valuable position in United Community Banks Inc (NASDAQ:UCBI). Weld Capital Management had $0.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new UCBI investors: Matthew Tewksbury’s Stevens Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Hoon Kim’s Quantinno Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Community Banks Inc (NASDAQ:UCBI) but similarly valued. We will take a look at Sanmina Corporation (NASDAQ:SANM), G-III Apparel Group, Ltd. (NASDAQ:GIII), Office Depot Inc (NASDAQ:ODP), and Stepan Company (NYSE:SCL). This group of stocks’ market caps resemble UCBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SANM | 18 | 208755 | 3 |
| GIII | 18 | 150459 | 5 |
| ODP | 22 | 78780 | -2 |
| SCL | 16 | 50725 | 4 |
| Average | 18.5 | 122180 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $54 million in UCBI’s case. Office Depot Inc (NASDAQ:ODP) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks United Community Banks Inc (NASDAQ:UCBI) is even less popular than SCL. Hedge funds clearly dropped the ball on UCBI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on UCBI as the stock returned 10.2% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
