Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Universal Technical Institute, Inc. (NYSE:UTI).
Is Universal Technical Institute, Inc. (NYSE:UTI) a buy, sell, or hold? Money managers are in a bullish mood. The number of bullish hedge fund bets increased by 2 in recent months. Our calculations also showed that UTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). UTI was in 7 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with UTI holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are assumed to be unimportant, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, Our experts choose to focus on the leaders of this club, around 750 funds. These money managers oversee the majority of the hedge fund industry’s total asset base, and by observing their best picks, Insider Monkey has revealed numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a glance at the latest hedge fund action regarding Universal Technical Institute, Inc. (NYSE:UTI).
How have hedgies been trading Universal Technical Institute, Inc. (NYSE:UTI)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UTI over the last 17 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.
The largest stake in Universal Technical Institute, Inc. (NYSE:UTI) was held by Coliseum Capital, which reported holding $19.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $8.5 million position. Other investors bullish on the company included Park West Asset Management, Royce & Associates, and GAMCO Investors. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Universal Technical Institute, Inc. (NYSE:UTI), around 5.48% of its 13F portfolio. Park West Asset Management is also relatively very bullish on the stock, dishing out 0.41 percent of its 13F equity portfolio to UTI.
As aggregate interest increased, key money managers were leading the bulls’ herd. Park West Asset Management, managed by Peter S. Park, initiated the biggest position in Universal Technical Institute, Inc. (NYSE:UTI). Park West Asset Management had $8.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Michael Gelband’s ExodusPoint Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Universal Technical Institute, Inc. (NYSE:UTI) but similarly valued. We will take a look at Danaos Corporation (NYSE:DAC), Mohawk Group Holdings, Inc. (NASDAQ:MWK), Capital Senior Living Corporation (NYSE:CSU), and Acorda Therapeutics Inc (NASDAQ:ACOR). This group of stocks’ market valuations are similar to UTI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAC | 1 | 554 | 0 |
| MWK | 3 | 4832 | 0 |
| CSU | 10 | 52380 | -4 |
| ACOR | 15 | 41326 | -1 |
| Average | 7.25 | 24773 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $42 million in UTI’s case. Acorda Therapeutics Inc (NASDAQ:ACOR) is the most popular stock in this table. On the other hand Danaos Corporation (NYSE:DAC) is the least popular one with only 1 bullish hedge fund positions. Universal Technical Institute, Inc. (NYSE:UTI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on UTI, though not to the same extent, as the stock returned 7.9% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
