Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Union Pacific Corporation (NYSE:UNP) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Union Pacific Corporation (NYSE:UNP) a marvelous stock to buy now? The best stock pickers were becoming less hopeful. The number of bullish hedge fund bets retreated by 6 recently. Union Pacific Corporation (NYSE:UNP) was in 63 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 75. Our calculations also showed that UNP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Union Pacific Corporation (NYSE:UNP).
Eric Mandelblatt of Soroban Capital Partners
Do Hedge Funds Think UNP Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in UNP over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chris Hohn’s TCI Fund Management has the largest position in Union Pacific Corporation (NYSE:UNP), worth close to $1.1214 billion, corresponding to 2.7% of its total 13F portfolio. The second largest stake is held by Eric W. Mandelblatt and Gaurav Kapadia of Soroban Capital Partners, with a $1.0713 billion position; the fund has 10% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Ken Fisher’s Fisher Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Soroban Capital Partners allocated the biggest weight to Union Pacific Corporation (NYSE:UNP), around 10.03% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, designating 7.44 percent of its 13F equity portfolio to UNP.
Due to the fact that Union Pacific Corporation (NYSE:UNP) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies who sold off their full holdings in the third quarter. At the top of the heap, Jaime Sterne’s Skye Global Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising about $53.2 million in call options, and Zach Schreiber’s Point State Capital was right behind this move, as the fund said goodbye to about $52.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Union Pacific Corporation (NYSE:UNP). We will take a look at BlackRock, Inc. (NYSE:BLK), The Goldman Sachs Group, Inc. (NYSE:GS), TotalEnergies SE (NYSE:TTE), Advanced Micro Devices, Inc. (NASDAQ:AMD), International Business Machines Corp. (NYSE:IBM), ServiceNow Inc (NYSE:NOW), and Sanofi (NASDAQ:SNY). This group of stocks’ market valuations are closest to UNP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLK | 44 | 1085328 | -3 |
| GS | 74 | 5451988 | 13 |
| TTE | 16 | 1398818 | 1 |
| AMD | 65 | 5254017 | 2 |
| IBM | 41 | 1405372 | 0 |
| NOW | 87 | 7527653 | -4 |
| SNY | 19 | 1287779 | 3 |
| Average | 49.4 | 3344422 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.4 hedge funds with bullish positions and the average amount invested in these stocks was $3344 million. That figure was $4886 million in UNP’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand TotalEnergies SE (NYSE:TTE) is the least popular one with only 16 bullish hedge fund positions. Union Pacific Corporation (NYSE:UNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNP is 57.3. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on UNP as the stock returned 25.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
