We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Ubiquiti Inc. (NYSE:UI) based on that data.
Ubiquiti Inc. (NYSE:UI) investors should pay attention to a decrease in support from the world's most elite money managers of late. Our calculations also showed that UI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's review the new hedge fund action regarding Ubiquiti Inc. (NYSE:UI).
What have hedge funds been doing with Ubiquiti Inc. (NYSE:UI)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in UI over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Ubiquiti Inc. (NYSE:UI), with a stake worth $58.9 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $51 million. D E Shaw, Bandera Partners, and Maverick Capital 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 Bandera Partners allocated the biggest weight to Ubiquiti Inc. (NYSE:UI), around 11.06% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 0.71 percent of its 13F equity portfolio to UI.
Due to the fact that Ubiquiti Inc. (NYSE:UI) has witnessed a decline in interest from the smart money, we can see that there were a few fund managers that decided to sell off their entire stakes by the end of the third quarter. It's worth mentioning that Charles Akre's Akre Capital Management cut the largest investment of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $277.6 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund cut about $1.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Ubiquiti Inc. (NYSE:UI). We will take a look at Zendesk Inc (NYSE:ZEN), Royal Gold, Inc (NASDAQ:RGLD), Sensata Technologies Holding N.V. (NYSE:ST), and ABIOMED, Inc. (NASDAQ:ABMD). This group of stocks' market valuations resemble UI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZEN,44,1453964,-6 RGLD,25,126740,6 ST,20,1377652,-1 ABMD,21,580988,-7 Average,27.5,884836,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $885 million. That figure was $182 million in UI's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Sensata Technologies Holding N.V. (NYSE:ST) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Ubiquiti Inc. (NYSE:UI) is even less popular than ST. Hedge funds clearly dropped the ball on UI as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 UI as the stock returned 67% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.