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Is United Insurance Holdings Corp. (NASDAQ:UIHC) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
United Insurance Holdings Corp. (NASDAQ:UIHC) was in 11 hedge funds' portfolios at the end of the third quarter of 2019. UIHC investors should be aware of an increase in hedge fund interest lately. There were 8 hedge funds in our database with UIHC holdings at the end of the previous quarter. Our calculations also showed that UIHC 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.
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David Harding of Winton Capital Management[/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. We're going to take a look at the fresh hedge fund action surrounding United Insurance Holdings Corp. (NASDAQ:UIHC).
Hedge fund activity in United Insurance Holdings Corp. (NASDAQ:UIHC)
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in UIHC over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in United Insurance Holdings Corp. (NASDAQ:UIHC), which was worth $5.1 million at the end of the third quarter. On the second spot was Polaris Capital Management which amassed $2.7 million worth of shares. Intrinsic Edge Capital, Renaissance Technologies, and Ancora Advisors 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 Intrinsic Edge Capital allocated the biggest weight to United Insurance Holdings Corp. (NASDAQ:UIHC), around 0.21% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to UIHC.
Now, key hedge funds have been driving this bullishness. Intrinsic Edge Capital, managed by Mark Coe, created the most valuable position in United Insurance Holdings Corp. (NASDAQ:UIHC). Intrinsic Edge Capital had $1.9 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.6 million position during the quarter. The following funds were also among the new UIHC investors: David Harding's Winton Capital Management, Paul Marshall and Ian Wace's Marshall Wace, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to United Insurance Holdings Corp. (NASDAQ:UIHC). These stocks are Huami Corporation (NYSE:HMI), Koppers Holdings Inc. (NYSE:KOP), Ruhnn Holding Limited (NASDAQ:RUHN), and Krystal Biotech, Inc. (NASDAQ:KRYS). This group of stocks' market caps are closest to UIHC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMI,4,6091,-2 KOP,13,40987,1 RUHN,1,115,-1 KRYS,11,159078,-1 Average,7.25,51568,-0.75 [/table]
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 $52 million. That figure was $14 million in UIHC's case. Koppers Holdings Inc. (NYSE:KOP) is the most popular stock in this table. On the other hand Ruhnn Holding Limited (NASDAQ:RUHN) is the least popular one with only 1 bullish hedge fund positions. United Insurance Holdings Corp. (NASDAQ:UIHC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately UIHC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on UIHC were disappointed as the stock returned -8.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.