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 Under Armour Inc (NYSE:UA) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Under Armour Inc (NYSE:UA) investors should be aware of a decrease in hedge fund interest lately. Under Armour Inc (NYSE:UA) was in 48 hedge funds’ portfolios at the end of September. The all time high for this statistic is 51. Our calculations also showed that UA 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. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding Under Armour Inc (NYSE:UA).
Mark Kingdon of Kingdon Capital
Do Hedge Funds Think UA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards UA 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.
When looking at the institutional investors followed by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Under Armour Inc (NYSE:UA). Adage Capital Management has a $344.5 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $123 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Karthik Sarma’s SRS Investment Management, Karthik Sarma’s SRS Investment Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Kingdon Capital allocated the biggest weight to Under Armour Inc (NYSE:UA), around 2.46% of its 13F portfolio. CQS Cayman LP is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to UA.
Due to the fact that Under Armour Inc (NYSE:UA) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies who sold off their positions entirely in the third quarter. It’s worth mentioning that Jimmy Levin’s Sculptor Capital sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $62.6 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also cut its stock, about $29.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Under Armour Inc (NYSE:UA). We will take a look at Rexford Industrial Realty Inc (NYSE:REXR), Phillips 66 Partners LP (NYSE:PSXP), The Scotts Miracle-Gro Company (NYSE:SMG), Ralph Lauren Corporation (NYSE:RL), Pinnacle West Capital Corporation (NYSE:PNW), Arrival (NASDAQ:ARVL), and Commerce Bancshares, Inc. (NASDAQ:CBSH). This group of stocks’ market valuations match UA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REXR | 29 | 358442 | 8 |
| PSXP | 5 | 31682 | 0 |
| SMG | 30 | 257473 | -2 |
| RL | 25 | 444724 | -7 |
| PNW | 21 | 175044 | 3 |
| ARVL | 4 | 10081 | -13 |
| CBSH | 16 | 106578 | 0 |
| Average | 18.6 | 197718 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $1644 million in UA’s case. The Scotts Miracle-Gro Company (NYSE:SMG) is the most popular stock in this table. On the other hand Arrival (NASDAQ:ARVL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Under Armour Inc (NYSE:UA) is more popular among hedge funds. Our overall hedge fund sentiment score for UA is 80.2. 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. Unfortunately, UA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UA were disappointed as the stock returned -8.7% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
