In this article you are going to find out whether hedge funds think United Parcel Service, Inc. (NYSE:UPS) is a good investment 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 Parcel Service, Inc. (NYSE:UPS) investors should be aware of an increase in activity from the world's largest hedge funds lately. Our calculations also showed that UPS 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.
In the eyes of most traders, hedge funds are perceived as underperforming, outdated investment vehicles of the past. While there are over 8000 funds in operation at the moment, Our experts choose to focus on the masters of this group, around 850 funds. These hedge fund managers shepherd the lion's share of the smart money's total asset base, and by paying attention to their matchless picks, Insider Monkey has identified numerous investment strategies that have historically outpaced the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_256969" align="aligncenter" width="399"] Christian Leone of Luxor Capital Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a peek at the new hedge fund action encompassing United Parcel Service, Inc. (NYSE:UPS).
Hedge fund activity in United Parcel Service, Inc. (NYSE:UPS)
Heading into the second quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the fourth quarter of 2019. By comparison, 37 hedge funds held shares or bullish call options in UPS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in United Parcel Service, Inc. (NYSE:UPS), which was worth $422.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $124.2 million worth of shares. Two Sigma Advisors, Adage Capital Management, and Citadel Investment Group 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 Scopus Asset Management allocated the biggest weight to United Parcel Service, Inc. (NYSE:UPS), around 2.62% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, designating 2.44 percent of its 13F equity portfolio to UPS.
As aggregate interest increased, key hedge funds were breaking ground themselves. Samlyn Capital, managed by Robert Pohly, assembled the most outsized position in United Parcel Service, Inc. (NYSE:UPS). Samlyn Capital had $31.3 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $14.7 million position during the quarter. The following funds were also among the new UPS investors: Ian Simm's Impax Asset Management, Benjamin A. Smith's Laurion Capital Management, and Christian Leone's Luxor Capital Group.
Let's also examine hedge fund activity in other stocks similar to United Parcel Service, Inc. (NYSE:UPS). These stocks are 3M Company (NYSE:MMM), British American Tobacco plc (NYSE:BTI), CVS Health Corporation (NYSE:CVS), and QUALCOMM, Incorporated (NASDAQ:QCOM). This group of stocks' market caps resemble UPS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMM,44,516510,-2 BTI,10,681088,1 CVS,71,1273110,13 QCOM,60,1621172,-7 Average,46.25,1022970,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $1023 million. That figure was $843 million in UPS's case. CVS Health Corporation (NYSE:CVS) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 10 bullish hedge fund positions. United Parcel Service, Inc. (NYSE:UPS) 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 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 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately UPS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on UPS were disappointed as the stock returned 4.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.