Is UPS Stock A Buy or Sell?

Is United Parcel Service, Inc. (NYSE:UPS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is UPS stock a buy or sell? United Parcel Service, Inc. (NYSE:UPS) shareholders have witnessed a decrease in enthusiasm from smart money of late. United Parcel Service, Inc. (NYSE:UPS) was in 48 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 57. Our calculations also showed that UPS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Robert Pohly of Samlyn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Keeping this in mind let’s review the recent hedge fund action encompassing United Parcel Service, Inc. (NYSE:UPS).

Do Hedge Funds Think UPS Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in UPS over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Michael Larson’s Bill & Melinda Gates Foundation Trust has the biggest position in United Parcel Service, Inc. (NYSE:UPS), worth close to $762.1 million, amounting to 3.4% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $133.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish include Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Ian Simm’s Impax Asset Management. In terms of the portfolio weights assigned to each position Cartenna Capital allocated the biggest weight to United Parcel Service, Inc. (NYSE:UPS), around 5.36% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, setting aside 3.41 percent of its 13F equity portfolio to UPS.

Judging by the fact that United Parcel Service, Inc. (NYSE:UPS) has witnessed declining sentiment from the smart money, it’s safe to say that there was a specific group of hedge funds that slashed their full holdings in the fourth quarter. At the top of the heap, Eashwar Krishnan’s Tybourne Capital Management dropped the largest investment of the 750 funds tracked by Insider Monkey, valued at close to $203.7 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund sold off about $45.6 million worth. These moves are important to note, as total hedge fund interest was cut by 9 funds in the fourth quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Parcel Service, Inc. (NYSE:UPS) but similarly valued. We will take a look at Union Pacific Corporation (NYSE:UNP), Bristol Myers Squibb Company (NYSE:BMY), Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), Anheuser-Busch InBev SA/NV (NYSE:BUD), JD.Com Inc (NASDAQ:JD), and Royal Dutch Shell plc (NYSE:RDS). This group of stocks’ market valuations resemble UPS’s market valuation.

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As you can see these stocks had an average of 68.6 hedge funds with bullish positions and the average amount invested in these stocks was $5665 million. That figure was $1254 million in UPS’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 bullish hedge fund positions. United Parcel Service, Inc. (NYSE:UPS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UPS is 34.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately UPS wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); UPS investors were disappointed as the stock returned -4.8% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.