“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Uniti Group Inc. (NASDAQ:UNIT) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Uniti Group Inc. (NASDAQ:UNIT) a good stock to buy now? Hedge funds are taking a pessimistic view. The number of long hedge fund positions dropped by 4 in recent months. Our calculations also showed that UNIT isn’t among the 30 most popular stocks among hedge funds. UNIT was in 14 hedge funds’ portfolios at the end of the third quarter of 2018. There were 18 hedge funds in our database with UNIT holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the recent hedge fund action surrounding Uniti Group Inc. (NASDAQ:UNIT).
How have hedgies been trading Uniti Group Inc. (NASDAQ:UNIT)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UNIT over the last 13 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Uniti Group Inc. (NASDAQ:UNIT) was held by Elliott Management, which reported holding $173.1 million worth of stock at the end of September. It was followed by Toscafund Asset Management with a $39.8 million position. Other investors bullish on the company included Sylebra Capital Management, HBK Investments, and Arrowstreet Capital.
Judging by the fact that Uniti Group Inc. (NASDAQ:UNIT) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co dropped the biggest investment of the 700 funds followed by Insider Monkey, valued at an estimated $34 million in stock, and Michael Hintze’s CQS Cayman LP was right behind this move, as the fund sold off about $6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Uniti Group Inc. (NASDAQ:UNIT) but similarly valued. These stocks are AngloGold Ashanti Limited (NYSE:AU), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Nomad Foods Limited Ordinary Shares (NYSE:NOMD), and Energizer Holdings, Inc. (NYSE:ENR). All of these stocks’ market caps match UNIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AU | 10 | 193265 | -2 |
| CBRL | 12 | 170523 | -2 |
| NOMD | 34 | 327059 | 4 |
| ENR | 26 | 271771 | 6 |
| Average | 20.5 | 240655 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $268 million in UNIT’s case. Nomad Foods Limited Ordinary Shares (NYSE:NOMD) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 10 bullish hedge fund positions. Uniti Group Inc. (NASDAQ:UNIT) 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 NOMD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
