Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Unitil Corporation (NYSE:UTL).
Unitil Corporation (NYSE:UTL) was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. UTL investors should be aware of a decrease in support from the world’s most successful money managers in recent months. There were 9 hedge funds in our database with UTL holdings at the end of the previous quarter. 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 Dynagas LNG Partners LP (NYSE:DLNG), Mercer International Inc. (NASDAQ:MERC), and Aclaris Therapeutics Inc (NASDAQ:ACRS) to gather more data points.
Follow Unitil Corp (NYSE:UTL)
Follow Unitil Corp (NYSE:UTL)
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 look at the latest action surrounding Unitil Corporation (NYSE:UTL).
How have hedgies been trading Unitil Corporation (NYSE:UTL)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 22% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in UTL at the beginning of this year. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the biggest hedge funds in the world, has the most valuable position in Unitil Corporation (NYSE:UTL), worth close to $16.2 million, comprising less than 0.1% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, which oversees a $7.8 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions include Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and D. 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-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually sold off their positions entirely. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $1.2 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its call options, about $0.7 million worth of.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Unitil Corporation (NYSE:UTL) but similarly valued. These stocks are Dynagas LNG Partners LP (NYSE:DLNG), Mercer International Inc. (NASDAQ:MERC), Aclaris Therapeutics Inc (NASDAQ:ACRS), and Otonomy Inc (NASDAQ:OTIC). All of these stocks’ market caps are closest to UTL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLNG | 4 | 4238 | 2 |
| MERC | 15 | 169771 | -6 |
| ACRS | 12 | 118903 | 8 |
| OTIC | 11 | 84280 | -1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $30 million in UTL’s case. Mercer International Inc. (NASDAQ:MERC) is the most popular stock in this table. On the other hand Dynagas LNG Partners LP (NYSE:DLNG) is the least popular one with only 4 bullish hedge fund positions. Unitil Corporation (NYSE:UTL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MERC might be a better candidate to consider taking a long position in.
Disclosure: none.