The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Ultrapar Participacoes SA (ADR) (NYSE:UGP) and find out how it is affected by hedge funds’ moves.
Hedge fund interest in Ultrapar Participacoes SA (ADR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare UGP to other stocks including Microchip Technology Inc. (NASDAQ:MCHP), Delhaize Group (ADR) (NYSE:DEG), and Tripadvisor Inc (NASDAQ:TRIP) to get a better sense of its popularity.
Follow Ultrapar Participacoes S A (NYSE:UGP)
Follow Ultrapar Participacoes S A (NYSE:UGP)
In the financial world there are tons of signals market participants use to appraise their stock investments. Some of the less known signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite money managers can outpace the market by a solid amount (see the details here).
Now, let’s take a glance at the recent action surrounding Ultrapar Participacoes SA (ADR) (NYSE:UGP).
What have hedge funds been doing with Ultrapar Participacoes SA (ADR) (NYSE:UGP)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the number one position in Ultrapar Participacoes SA (ADR) (NYSE:UGP). Renaissance Technologies has a $79 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding a $3.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include David Costen Haley’s HBK Investments, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
Judging by the fact that Ultrapar Participacoes SA (ADR) (NYSE:UGP) has witnessed a declination in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of the 700 funds tracked by Insider Monkey, valued at about $2.3 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also said goodbye to its stock, about $0.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ultrapar Participacoes SA (ADR) (NYSE:UGP) but similarly valued. These stocks are Microchip Technology Inc. (NASDAQ:MCHP), Delhaize Group (ADR) (NYSE:DEG), Tripadvisor Inc (NASDAQ:TRIP), and Harris Corporation (NYSE:HRS). This group of stocks’ market values match UGP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCHP | 24 | 151662 | 7 |
| DEG | 5 | 36780 | -4 |
| TRIP | 43 | 1006394 | 3 |
| HRS | 39 | 873794 | 3 |
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $517 million. That figure was $84 million in UGP’s case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand Delhaize Group (ADR) (NYSE:DEG) is the least popular one with only 5 bullish hedge fund positions. Ultrapar Participacoes SA (ADR) (NYSE:UGP) 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 TRIP might be a better candidate to consider a long position.
