Is United Technologies Corporation (UTX) Going to Burn These Hedge Funds?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze United Technologies Corporation (NYSE:UTX).

Is United Technologies Corporation (NYSE:UTX) a bargain? Prominent investors are turning less bullish. The number of long hedge fund bets were cut by 8 recently. UTX was in 48 hedge funds’ portfolios at the end of the third quarter of 2016. There were 56 hedge funds in our database with UTX positions at the end of the previous quarter. At the end of this article we will also compare UTX to other stocks including Starbucks Corporation (NASDAQ:SBUX), The Boeing Company (NYSE:BA), and Toronto-Dominion Bank (USA) (NYSE:TD) to get a better sense of its popularity.

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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Keeping this in mind, we’re going to take a gander at the recent action regarding United Technologies Corporation (NYSE:UTX).

Hedge fund activity in United Technologies Corporation (NYSE:UTX)

Heading into the fourth quarter of 2016, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the largest position in United Technologies Corporation (NYSE:UTX). Fisher Asset Management has a $845 million position in the stock, comprising 1.5% of its 13F portfolio. On Fisher Asset Management’s heels is Southeastern Asset Management, managed by Mason Hawkins, which holds a $671.1 million position; 6.4% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions encompass Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Ric Dillon’s Diamond Hill Capital and D. E. Shaw’s D E Shaw.

Since United Technologies Corporation (NYSE:UTX) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely heading into Q4. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the largest investment of all the hedgies watched by Insider Monkey, valued at about $51.2 million in call options, and Gordy Holterman and Derek Dunn’s Overland Advisors was right behind this move, as the fund dumped about $25.6 million worth. These transactions are interesting, as total hedge fund interest fell by 8 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United Technologies Corporation (NYSE:UTX) but similarly valued. These stocks are Starbucks Corporation (NASDAQ:SBUX), The Boeing Company (NYSE:BA), Toronto-Dominion Bank (USA) (NYSE:TD), and QUALCOMM, Inc. (NASDAQ:QCOM). This group of stocks’ market values are closest to UTX’s market value.

As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.85 billion. That figure was $3.55 billion in UTX’s case. QUALCOMM, Inc. (NASDAQ:QCOM) is the most popular stock in this table. On the other hand Toronto-Dominion Bank (USA) (NYSE:TD) is the least popular one with only 17 bullish hedge fund positions. United Technologies Corporation (NYSE:UTX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard QCOM might be a better candidate to consider a long position.