“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards United Therapeutics Corporation (NASDAQ:UTHR) and see how it was affected.
United Therapeutics Corporation (NASDAQ:UTHR) was in 18 hedge funds’ portfolios at the end of September. UTHR has seen a decrease in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with UTHR holdings at the end of the previous quarter. Our calculations also showed that uthr isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Cliff Asness of AQR Capital Management
We’re going to view the key hedge fund action surrounding United Therapeutics Corporation (NASDAQ:UTHR).
What have hedge funds been doing with United Therapeutics Corporation (NASDAQ:UTHR)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UTHR over the last 13 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of United Therapeutics Corporation (NASDAQ:UTHR), with a stake worth $248.6 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $237.4 million. Palo Alto Investors, Consonance Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that United Therapeutics Corporation (NASDAQ:UTHR) has faced a decline in interest from hedge fund managers, it’s safe to say that there is a sect of funds that slashed their positions entirely heading into Q3. It’s worth mentioning that Israel Englander’s Millennium Management sold off the largest position of the 700 funds watched by Insider Monkey, totaling close to $3.4 million in stock, and Mitch Cantor’s Mountain Lake Investment Management was right behind this move, as the fund dumped about $2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. These stocks are GCI Liberty, Inc. (NASDAQ:GLIBA), Envision Healthcare Holdings Inc (NYSE:EVHC), PLDT Inc. (NYSE:PHI), and SCANA Corporation (NYSE:SCG). This group of stocks’ market values are similar to UTHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLIBA | 36 | 1640542 | 0 |
| EVHC | 35 | 1409277 | -3 |
| PHI | 3 | 70426 | 1 |
| SCG | 30 | 378589 | 11 |
| Average | 26 | 874709 | 2.25 |
View table here if you experience formatting issues.
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 $875 million. That figure was $1.01 billion in UTHR’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 3 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) 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 GLIBA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
