Is Universal Corp (UVV) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Universal Corp (NYSE:UVV) investors should be aware of a decrease in hedge fund sentiment of late. UVV was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 16 hedge funds in our database with UVV positions 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 First Cash Financial Services, Inc. (NASDAQ:FCFS) and Axiall Corp (NYSE:AXLL), to gather more data points.

According to most shareholders, hedge funds are viewed as underperforming, old investment tools of the past. While there are over an 8000 funds trading at present, Our researchers hone in on the moguls of this club, about 700 funds. Most estimates calculate that this group of people handles the bulk of all hedge funds’ total asset base, and by following their finest equity investments, Insider Monkey has determined a few investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s go over the key action encompassing Universal Corp (NYSE:UVV).

Hedge fund activity in Universal Corp (NYSE:UVV)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 31% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Gotham Asset Management, managed by Joel Greenblatt, holds the most valuable position in Universal Corp (NYSE:UVV). Gotham Asset Management has a $25.3 million position in the stock, comprising 0.2% of its 13F portfolio. On Gotham Asset Management’s heels is Pzena Investment Management, led by Richard S. Pzena, holding a $24.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish consist of Chuck Royce’s Royce & Associates, Jim Simons’ Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Judging by the fact that Universal Corp (NYSE:UVV) has faced a declination in interest from hedge fund managers, it’s easy to see that there exists a select few hedgies who sold off their positions entirely by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the largest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $4.9 million in stock, and Neil Chriss’ Hutchin Hill Capital was right behind this move, as the fund dropped about $2.3 million worth. These moves are interesting, as total hedge fund interest was cut by 5 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Universal Corp (NYSE:UVV). We will take a look at First Cash Financial Services, Inc. (NASDAQ:FCFS), Axiall Corp (NYSE:AXLL), and Benchmark Electronics, Inc. (NYSE:BHE). This group of stocks’ market valuations match UVV’s market valuation.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $149 million, higher than the $76 million that hedge funds we track amassed in UVV’s stock. Axiall Corp (NYSE:AXLL) is the most popular stock in this table. On the other hand First Cash Financial Services, Inc. (NASDAQ:FCFS) is the least popular one with only 11 bullish hedge fund positions, which is the same as in Universal Corp (NYSE:UVV)’s case. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AXLL might be a better candidate to consider a long position.