Should You Buy United Therapeutics Corporation (UTHR)?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in United Therapeutics Corporation (NASDAQ:UTHR).

United Therapeutics Corporation (NASDAQ:UTHR) was in 31 hedge funds’ portfolios at the end of September. UTHR has experienced an increase in hedge fund sentiment of late. There were 30 hedge funds in our database with UTHR 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 Braskem SA (ADR) (NYSE:BAK), NRG Energy Inc (NYSE:NRG), and B/E Aerospace Inc (NASDAQ:BEAV) to gather more data points.

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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How are hedge funds trading United Therapeutics Corporation (NASDAQ:UTHR)?

Heading into the fourth quarter of 2016, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 3% from the second quarter of 2016. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Matt Sirovich and Jeremy Mindich’s Scopia Capital has the most valuable position in United Therapeutics Corporation (NASDAQ:UTHR), worth close to $483.3 million, corresponding to 8.5% of its total 13F portfolio. The second most bullish fund manager is Palo Alto Investors, managed by William Leland Edwards, which holds a $208.2 million position; the fund has 12.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish encompass Cliff Asness’ AQR Capital Management, Mitchell Blutt’s Consonance Capital Management and Jim Simons’ Renaissance Technologies.

As one would reasonably expect, specific money managers were breaking ground themselves. Sabby Capital, managed by Hal Mintz, assembled the most valuable position in United Therapeutics Corporation (NASDAQ:UTHR). Sabby Capital had $3.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $2.9 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Matthew Tewksbury’s Stevens Capital Management, and Mike Vranos’ Ellington.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. These stocks are Braskem SA (ADR) (NYSE:BAK), NRG Energy Inc (NYSE:NRG), B/E Aerospace Inc (NASDAQ:BEAV), and Great Plains Energy Incorporated (NYSE:GXP). All of these stocks’ market caps match UTHR’s market cap.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $1.26 billion in UTHR’s case. B/E Aerospace Inc (NASDAQ:BEAV) is the most popular stock in this table. On the other hand Braskem SA (ADR) (NYSE:BAK) is the least popular one with only 8 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) 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 BEAV might be a better candidate to consider a long position.

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Disclosure: None