Were Hedge Funds Right About UniFirst Corp (UNF)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about UniFirst Corp (NYSE:UNF)?

Is UniFirst Corp (NYSE:UNF) the right pick for your portfolio? Investors who are in the know were turning bullish. The number of long hedge fund positions inched up by 2 lately. UniFirst Corp (NYSE:UNF) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 24. Our calculations also showed that UNF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 15 hedge funds in our database with UNF positions at the end of the fourth quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Martin Whitman of Third Avenue Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now we’re going to take a glance at the fresh hedge fund action encompassing UniFirst Corp (NYSE:UNF).

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

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in UNF a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in UniFirst Corp (NYSE:UNF), which was worth $18 million at the end of the fourth quarter. On the second spot was Sirios Capital Management which amassed $11.2 million worth of shares. Renaissance Technologies, Millennium Management, and Third Avenue Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to UniFirst Corp (NYSE:UNF), around 4.05% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 0.94 percent of its 13F equity portfolio to UNF.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Renaissance Technologies, assembled the biggest position in UniFirst Corp (NYSE:UNF). Renaissance Technologies had $4.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1.2 million position during the quarter. The following funds were also among the new UNF investors: Donald Sussman’s Paloma Partners, Jinghua Yan’s TwinBeech Capital, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as UniFirst Corp (NYSE:UNF) but similarly valued. We will take a look at PNM Resources, Inc. (NYSE:PNM), Axis Capital Holdings Limited (NYSE:AXS), Black Hills Corporation (NYSE:BKH), WD-40 Company (NASDAQ:WDFC), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Yamana Gold Inc. (NYSE:AUY), and Advanced Energy Industries, Inc. (NASDAQ:AEIS). All of these stocks’ market caps are closest to UNF’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $381 million. That figure was $53 million in UNF’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand WD-40 Company (NASDAQ:WDFC) is the least popular one with only 14 bullish hedge fund positions. UniFirst Corp (NYSE:UNF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UNF is 36.1. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately UNF wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UNF investors were disappointed as the stock returned -2.9% since the end of March (through 7/23) 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 in 2021.

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