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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of United Insurance Holdings Corp. (NASDAQ:UIHC).
United Insurance Holdings Corp. (NASDAQ:UIHC) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. UIHC was in 9 hedge funds' portfolios at the end of the first quarter of 2020. There were 12 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 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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.
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Fred DiSanto of Ancora Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Now we're going to analyze the new hedge fund action regarding United Insurance Holdings Corp. (NASDAQ:UIHC).
How are hedge funds trading United Insurance Holdings Corp. (NASDAQ:UIHC)?
At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2019. By comparison, 7 hedge funds held shares or bullish call options in UIHC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Polaris Capital Management was the largest shareholder of United Insurance Holdings Corp. (NASDAQ:UIHC), with a stake worth $1.6 million reported as of the end of September. Trailing Polaris Capital Management was Citadel Investment Group, which amassed a stake valued at $0.8 million. Renaissance Technologies, Ancora Advisors, and D E Shaw 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 Polaris Capital Management allocated the biggest weight to United Insurance Holdings Corp. (NASDAQ:UIHC), around 0.1% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to UIHC.
Due to the fact that United Insurance Holdings Corp. (NASDAQ:UIHC) has witnessed declining sentiment from the smart money, logic holds that there lies a certain "tier" of funds who sold off their full holdings heading into Q4. At the top of the heap, Mark Coe's Intrinsic Edge Capital said goodbye to the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $1.4 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to United Insurance Holdings Corp. (NASDAQ:UIHC). We will take a look at The Pennant Group, Inc. (NASDAQ:PNTG), Agilysys, Inc. (NASDAQ:AGYS), City Office REIT Inc (NYSE:CIO), and Community Health Systems, Inc. (NYSE:CYH). This group of stocks' market values are closest to UIHC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNTG,8,16893,2 AGYS,14,85802,-2 CIO,15,34627,2 CYH,20,159301,4 Average,14.25,74156,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $5 million in UIHC's case. Community Health Systems, Inc. (NYSE:CYH) is the most popular stock in this table. On the other hand The Pennant Group, Inc. (NASDAQ:PNTG) is the least popular one with only 8 bullish hedge fund positions. United Insurance Holdings Corp. (NASDAQ:UIHC) 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately UIHC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UIHC investors were disappointed as the stock returned -17.6% 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.