How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Under Armour Inc (NYSE:UA).
Under Armour Inc (NYSE:UA) has experienced an increase in activity from the world’s largest hedge funds of late. Under Armour Inc (NYSE:UA) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 37 hedge funds in our database with UA positions at the end of the first quarter. Our calculations also showed that UA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are over 8000 funds in operation at present, We hone in on the masters of this group, approximately 850 funds. These investment experts oversee most of the hedge fund industry’s total capital, and by paying attention to their first-class picks, Insider Monkey has formulated many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a glance at the fresh hedge fund action encompassing Under Armour Inc (NYSE:UA).
What does smart money think about Under Armour Inc (NYSE:UA)?
At Q2’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in UA a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the most valuable position in Under Armour Inc (NYSE:UA), worth close to $130.2 million, comprising 0.3% of its total 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $97.3 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass D. E. Shaw’s D E Shaw, Anand Parekh’s Alyeska Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Under Armour Inc (NYSE:UA), around 1.14% of its 13F portfolio. Senator Investment Group is also relatively very bullish on the stock, designating 0.61 percent of its 13F equity portfolio to UA.
As industrywide interest jumped, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Under Armour Inc (NYSE:UA). Arrowstreet Capital had $28.3 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $17.7 million position during the quarter. The other funds with brand new UA positions are Anand Parekh’s Alyeska Investment Group, John Smith Clark’s Southpoint Capital Advisors, and Simon Sadler’s Segantii Capital.
Let’s go over hedge fund activity in other stocks similar to Under Armour Inc (NYSE:UA). We will take a look at Starwood Property Trust, Inc. (NYSE:STWD), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Youdao, Inc. (NYSE:DAO), Healthequity Inc (NASDAQ:HQY), DXC Technology Company (NYSE:DXC), Jefferies Financial Group Inc. (NYSE:JEF), and Ashland Global Holdings Inc.. (NYSE:ASH). This group of stocks’ market caps are closest to UA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STWD | 22 | 168439 | -1 |
| NCLH | 28 | 170565 | 8 |
| DAO | 13 | 381255 | 7 |
| HQY | 18 | 164752 | -1 |
| DXC | 40 | 529806 | -1 |
| JEF | 37 | 586275 | 7 |
| ASH | 32 | 976347 | 0 |
| Average | 27.1 | 425348 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $559 million in UA’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Youdao, Inc. (NYSE:DAO) is the least popular one with only 13 bullish hedge fund positions. Under Armour Inc (NYSE:UA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UA is 88. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on UA as the stock returned 38.3% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Under Armour Inc. (NYSE:UA)
Follow Under Armour Inc. (NYSE:UA)
Disclosure: None. This article was originally published at Insider Monkey.
