Was The Smart Money Right About Uber Technologies (UBER)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Uber Technologies, Inc. (NYSE:UBER) to find out whether there were any major changes in hedge funds’ views.

Uber Technologies, Inc. (NYSE:UBER) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Uber Technologies, Inc. (NYSE:UBER) was in 135 hedge funds’ portfolios at the end of June. The all time high for this statistic is 135. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 130 hedge funds in our database with UBER positions at the end of the first quarter. Our calculations also showed that UBER ranked 11th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Brad Gerstner of Altimeter Capital

Now let’s review the key hedge fund action regarding Uber Technologies, Inc. (NYSE:UBER).

Do Hedge Funds Think UBER Is A Good Stock To Buy Now?

At the end of June, a total of 135 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 94 hedge funds with a bullish position in UBER a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in Uber Technologies, Inc. (NYSE:UBER) was held by Altimeter Capital Management, which reported holding $1227.9 million worth of stock at the end of June. It was followed by Tiger Global Management LLC with a $1039.9 million position. Other investors bullish on the company included Coatue Management, Point72 Asset Management, and D E Shaw. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to Uber Technologies, Inc. (NYSE:UBER), around 16.92% of its 13F portfolio. Tao Capital is also relatively very bullish on the stock, earmarking 14.78 percent of its 13F equity portfolio to UBER.

Now, key hedge funds were leading the bulls’ herd. SRS Investment Management, managed by Karthik Sarma, established the most valuable position in Uber Technologies, Inc. (NYSE:UBER). SRS Investment Management had $172.4 million invested in the company at the end of the quarter. David Tepper’s Appaloosa Management LP also initiated a $102 million position during the quarter. The other funds with brand new UBER positions are Scott Ferguson’s Sachem Head Capital, Richard Merage’s MIG Capital, and Jeff Lignelli’s Incline Global Management.

Let’s now take a look at hedge fund activity in other stocks similar to Uber Technologies, Inc. (NYSE:UBER). These stocks are Anthem Inc (NYSE:ANTM), Lam Research Corporation (NASDAQ:LRCX), Airbnb, Inc. (NASDAQ:ABNB), British American Tobacco plc (NYSE:BTI), Infosys Limited (NYSE:INFY), Booking Holdings Inc. (NASDAQ:BKNG), and PetroChina Company Limited (NYSE:PTR). This group of stocks’ market values resemble UBER’s market value.

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As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $3067 million. That figure was $10413 million in UBER’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Uber Technologies, Inc. (NYSE:UBER) is more popular among hedge funds. Our overall hedge fund sentiment score for UBER is 95. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately UBER wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UBER were disappointed as the stock returned -12.6% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.