Universal Technical Institute, Inc. (UTI): Are Hedge Funds Right About This Stock?

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 elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Universal Technical Institute, Inc. (NYSE:UTI).

In July, Universal Technical Institute, Inc. (NYSE:UTI)’s stock started losing ground and is 58% in the red year-to-date. At the same time investors should be aware of a decrease in activity from the world’s largest hedge funds during the third quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. That’s why at the end of this article we will examine companies such as The L.S. Starrett Company (NYSE:SCX), Covisint Corp (NASDAQ:COVS), and The McClatchy Company (NYSE:MNI) to gather more data points.

Today there are several metrics shareholders have at their disposal to evaluate publicly traded companies. A pair of the most useful metrics are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top fund managers can outperform the market by a significant margin (see the details here).

With all of this in mind, let’s take a look at the fresh action encompassing Universal Technical Institute, Inc. (NYSE:UTI).

What have hedge funds been doing with Universal Technical Institute, Inc. (NYSE:UTI)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 8% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Stadium Capital Management, managed by Alexander Medina Seaver, holds the biggest position in Universal Technical Institute, Inc. (NYSE:UTI). Stadium Capital Management has a $12.7 million position in the stock, comprising 4.6% of its 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, with a $2.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Chuck Royce’s Royce & Associates, Mario Gabelli’s GAMCO Investors, and Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management.

Due to the fact that Universal Technical Institute, Inc. (NYSE:UTI) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that elected to cut their positions entirely by the end of the third quarter. Intriguingly, David Brown’s Hawk Ridge Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at about $0.9 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 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 Universal Technical Institute, Inc. (NYSE:UTI) but similarly valued. These stocks are The L.S. Starrett Company (NYSE:SCX), Covisint Corp (NASDAQ:COVS), The McClatchy Company (NYSE:MNI), and Tenax Therapeutics Inc (NASDAQ:TENX). This group of stocks’ market values are closest to UTI’s market value.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $21 million in UTI’s case. The McClatchy Company (NYSE:MNI) is the most popular stock in this table. On the other hand The L.S. Starrett Company (NYSE:SCX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Universal Technical Institute, Inc. (NYSE:UTI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.