Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: UCP Inc (NYSE:UCP).
UCP Inc (NYSE:UCP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare UCP to other stocks including Hutchinson Technology Incorporated (NASDAQ:HTCH), iCAD Inc (NASDAQ:ICAD), and Galectin Therapeutics Inc. (NASDAQ:GALT) to get a better sense of its popularity.
Follow Ucp Inc. (NYSE:UCP)
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To most traders, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are greater than an 8000 funds in operation today, Our experts hone in on the upper echelon of this club, approximately 700 funds. These hedge fund managers manage most of the smart money’s total capital, and by paying attention to their top equity investments, Insider Monkey has determined several investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s take a glance at the key action regarding UCP Inc (NYSE:UCP).
Hedge fund activity in UCP Inc (NYSE:UCP)
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Buckingham Capital Management, managed by David Keidan, holds the largest position in UCP Inc (NYSE:UCP). Buckingham Capital Management has a $6.9 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is Central Square Management, managed by Kelly Cardwell, which holds a $3.7 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Martin Whitman’s Third Avenue Management, David Cohen and Harold Levy’s Iridian Asset Management and Joseph A. Jolson’s Harvest Capital Strategies.
Judging by the fact that UCP Inc (NYSE:UCP) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedgies who were dropping their entire stakes in the third quarter. Intriguingly, Jim Simons’s Renaissance Technologies cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $0.5 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to UCP Inc (NYSE:UCP). These stocks are Hutchinson Technology Incorporated (NASDAQ:HTCH), iCAD Inc (NASDAQ:ICAD), Galectin Therapeutics Inc. (NASDAQ:GALT), and Catalyst Biosciences Inc (NASDAQ:CBIO). This group of stocks’ market caps resemble UCP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTCH | 6 | 3601 | -2 |
| ICAD | 4 | 2015 | -2 |
| GALT | 4 | 1677 | -2 |
| CBIO | 9 | 9035 | 9 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million, significantly lower compared to the $13 million in UCP’s case. Catalyst Biosciences Inc (NASDAQ:CBIO) is the most popular stock in this table. On the other hand iCAD Inc (NASDAQ:ICAD) is the least popular one with only 4 bullish hedge fund positions. UCP Inc (NYSE:UCP) 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 CBIO might be a better candidate to consider a long position.
