Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
The Unilever Group (NYSE:UL) was in 10 hedge funds' portfolios at the end of June. UL investors should pay attention to a decrease in support from the world's most elite money managers in recent months. There were 13 hedge funds in our database with UL holdings at the end of the previous quarter. Our calculations also showed that UL isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the key hedge fund action encompassing The Unilever Group (NYSE:UL).
Hedge fund activity in The Unilever Group (NYSE:UL)
Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the first quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in UL a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of The Unilever Group (NYSE:UL), with a stake worth $301.1 million reported as of the end of March. Trailing Arrowstreet Capital was Markel Gayner Asset Management, which amassed a stake valued at $94.7 million. Pittencrieff Partners - Gabalex Capital, Wallace Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Because The Unilever Group (NYSE:UL) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds that slashed their entire stakes in the second quarter. Interestingly, Israel Englander's Millennium Management cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $6.5 million in stock. Ken Griffin's fund, Citadel Investment Group, also sold off its stock, about $4.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds in the second quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Unilever Group (NYSE:UL) but similarly valued. These stocks are Netflix, Inc. (NASDAQ:NFLX), Citigroup Inc. (NYSE:C), The Unilever Group (NYSE:UN), and McDonald's Corporation (NYSE:MCD). This group of stocks' market caps are similar to UL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFLX,106,11090012,10 C,83,10543687,-4 UN,16,1291383,-3 MCD,52,2906375,-2 Average,64.25,6457864,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 64.25 hedge funds with bullish positions and the average amount invested in these stocks was $6458 million. That figure was $425 million in UL's case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks The Unilever Group (NYSE:UL) is even less popular than UN. Hedge funds dodged a bullet by taking a bearish stance towards UL. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately UL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); UL investors were disappointed as the stock returned -2.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.