Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of AMERCO (NASDAQ:UHAL).
AMERCO (NASDAQ:UHAL) was in 15 hedge funds' portfolios at the end of March. UHAL has experienced a decrease in hedge fund sentiment in recent months. There were 17 hedge funds in our database with UHAL positions at the end of the previous quarter. Our calculations also showed that UHAL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_758450" align="aligncenter" width="398"] Martin Whitman of Third Avenue Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the key hedge fund action regarding AMERCO (NASDAQ:UHAL).
What have hedge funds been doing with AMERCO (NASDAQ:UHAL)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UHAL over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, David Abrams's Abrams Capital Management has the largest position in AMERCO (NASDAQ:UHAL), worth close to $163.1 million, corresponding to 6.4% of its total 13F portfolio. On Abrams Capital Management's heels is Donald Yacktman of Yacktman Asset Management, with a $64.4 million position; 1.1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Cliff Asness's AQR Capital Management, Jonathan Esfandi's JNE Partners and Martin Whitman's Third Avenue Management. In terms of the portfolio weights assigned to each position JNE Partners allocated the biggest weight to AMERCO (NASDAQ:UHAL), around 24.34% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, dishing out 6.42 percent of its 13F equity portfolio to UHAL.
Seeing as AMERCO (NASDAQ:UHAL) has faced bearish sentiment from the smart money, it's easy to see that there was a specific group of hedge funds that decided to sell off their entire stakes heading into Q4. Intriguingly, Clint Murray's Lodge Hill Capital said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth close to $11.2 million in stock. Harry Gail's fund, Harspring Capital Management, also dumped its stock, about $4.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to AMERCO (NASDAQ:UHAL). These stocks are argenx SE (NASDAQ:ARGX), Elbit Systems Ltd. (NASDAQ:ESLT), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), and Jazz Pharmaceuticals Plc (NASDAQ:JAZZ). This group of stocks' market valuations resemble UHAL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARGX,25,588505,-1 ESLT,6,13855,3 HZNP,41,1686085,8 JAZZ,29,805357,4 Average,25.25,773451,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $773 million. That figure was $318 million in UHAL's case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 6 bullish hedge fund positions. AMERCO (NASDAQ:UHAL) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately UHAL wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UHAL investors were disappointed as the stock returned 0.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.