There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze UniFirst Corp (NYSE:UNF).
UniFirst Corp (NYSE:UNF) was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. UNF has experienced a decrease in enthusiasm from smart money of late. There were 19 hedge funds in our database with UNF holdings at the end of the previous quarter. At the end of this article we will also compare UNF to other stocks including Pure Storage Inc(NYSE:PSTG), MKS Instruments, Inc. (NASDAQ:MKSI), and LPL Financial Holdings Inc (NASDAQ:LPLA) to get a better sense of its popularity.
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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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What does the smart money think about UniFirst Corp (NYSE:UNF)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 32% drop from the previous quarter, as hedge fund ownership slides to a yearly low. There were a total of 19 hedge funds with a bullish position in UNF at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the most valuable position in UniFirst Corp (NYSE:UNF). Royce & Associates has a $122.1 million position in the stock. The second most bullish fund manager is Joel Greenblatt of Gotham Asset Management, with a $19.2 million position. Some other peers that hold long positions consist of Jim Simons’ Renaissance Technologies, Greg Poole’s Echo Street Capital Management, and Cliff Asness’ AQR Capital Management. 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.
Seeing as UniFirst Corp (NYSE:UNF) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest investment of the 700 funds followed by Insider Monkey, worth close to $1.9 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its stock, about $1.5 million worth.
Let’s go over hedge fund activity in other stocks similar to UniFirst Corp (NYSE:UNF). We will take a look at Pure Storage Inc(NYSE:PSTG), MKS Instruments, Inc. (NASDAQ:MKSI), LPL Financial Holdings Inc (NASDAQ:LPLA), and REGAL-BELOIT CORPORATION (NYSE:RBC). All of these stocks’ market caps resemble UNF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSTG | 17 | 127345 | 3 |
| MKSI | 16 | 238113 | -3 |
| LPLA | 12 | 964791 | -1 |
| RBC | 21 | 158826 | 6 |
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 $372 million. That figure was $186 million in UNF’s case. REGAL-BELOIT CORPORATION (NYSE:RBC) is the most popular stock in this table. On the other hand LPL Financial Holdings Inc (NASDAQ:LPLA) is the least popular one with only 12 bullish hedge fund positions. UniFirst Corp (NYSE:UNF) 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 RBC might be a better candidate to consider taking a long position in.
Disclosure: None
