Is United Microelectronics Corp (ADR) (UMC) A Good Stock to Buy?

Hedge funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is United Microelectronics Corp (ADR) (NYSE:UMC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

United Microelectronics Corp (ADR) (NYSE:UMC) was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. UMC has experienced a decrease in hedge fund sentiment of late. There were 9 hedge funds in our database with UMC positions at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as National Fuel Gas Co. (NYSE:NFG), Navient Corp (NASDAQ:NAVI), and Amtrust Financial Services, Inc. (NASDAQ:AFSI) to gather more data points.

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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How are hedge funds trading United Microelectronics Corp (ADR) (NYSE:UMC)?

Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UMC over the last 5 quarters, which peaked at the end of March. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the most valuable position in United Microelectronics Corp (ADR) (NYSE:UMC), worth close to $14.9 million. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $7.5 million position. Other professional money managers that hold long positions comprise Michael Hintze’s CQS Cayman LP, Israel Englander’s Millennium Management, and David E. Shaw’s D E Shaw. 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-micro-cap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. It’s worth mentioning that Satyen Mehta’s Neon Liberty Capital Management cut the biggest stake of all the investors tracked by Insider Monkey, totaling an estimated $2.7 million in stock, and Ernest Chow and Jonathan Howe’s Sensato Capital Management was right behind this move, as the fund dumped about $0.5 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United Microelectronics Corp (ADR) (NYSE:UMC) but similarly valued. We will take a look at National Fuel Gas Co. (NYSE:NFG), Navient Corp (NASDAQ:NAVI), Amtrust Financial Services, Inc. (NASDAQ:AFSI), and Banco Macro SA (ADR) (NYSE:BMA). This group of stocks’ market caps match UMC’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $31 million in UMC’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand Banco Macro SA (ADR) (NYSE:BMA) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks United Microelectronics Corp (ADR) (NYSE:UMC) is even less popular than BMA. 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.

Disclosure: None