We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of United Microelectronics Corp (NYSE:UMC) based on that data.
Is United Microelectronics Corp (NYSE:UMC) the right pick for your portfolio? Hedge funds are betting on the stock. The number of long hedge fund bets increased by 1 in recent months. Our calculations also showed that UMC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). UMC was in 14 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with UMC holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Hintze of CQS Cayman LP
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the latest hedge fund action regarding United Microelectronics Corp (NYSE:UMC).
Hedge fund activity in United Microelectronics Corp (NYSE:UMC)
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UMC over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of United Microelectronics Corp (NYSE:UMC), with a stake worth $47.9 million reported as of the end of September. Trailing Renaissance Technologies was LMR Partners, which amassed a stake valued at $45.2 million. Arrowstreet Capital, CQS Cayman LP, and Ovata Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ovata Capital Management allocated the biggest weight to United Microelectronics Corp (NYSE:UMC), around 3.86% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, setting aside 2.14 percent of its 13F equity portfolio to UMC.
As one would reasonably expect, specific money managers were breaking ground themselves. Ovata Capital Management, managed by James Chen, established the most valuable position in United Microelectronics Corp (NYSE:UMC). Ovata Capital Management had $5.2 million invested in the company at the end of the quarter. Nick Thakore’s Diametric Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new UMC position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United Microelectronics Corp (NYSE:UMC) but similarly valued. We will take a look at Healthcare Trust Of America Inc (NYSE:HTA), Dunkin Brands Group Inc (NASDAQ:DNKN), Wix.Com Ltd (NASDAQ:WIX), and CACI International Inc (NYSE:CACI). This group of stocks’ market valuations resemble UMC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTA | 11 | 186628 | -9 |
| DNKN | 31 | 272021 | 3 |
| WIX | 34 | 1072887 | 1 |
| CACI | 24 | 441472 | -2 |
| Average | 25 | 493252 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $493 million. That figure was $125 million in UMC’s case. Wix.Com Ltd (NASDAQ:WIX) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 11 bullish hedge fund positions. United Microelectronics Corp (NYSE:UMC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on UMC as the stock returned -16.4% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
