In this article we will check out the progression of hedge fund sentiment towards UFP Technologies, Inc. (NASDAQ:UFPT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
UFP Technologies, Inc. (NASDAQ:UFPT) shareholders have witnessed a decrease in support from the world's most elite money managers of late. Our calculations also showed that UFPT 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 financial world there are a multitude of methods shareholders put to use to analyze their stock investments. A couple of the most underrated methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the broader indices by a very impressive amount (see the details here).
[caption id="attachment_338410" align="aligncenter" width="396"] Jeffrey Bronchick of Cove Street Capital[/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 top 15 defense contractors 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 take a peek at the latest hedge fund action surrounding UFP Technologies, Inc. (NASDAQ:UFPT).
How have hedgies been trading UFP Technologies, Inc. (NASDAQ:UFPT)?
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 -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UFPT over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the most valuable position in UFP Technologies, Inc. (NASDAQ:UFPT). Renaissance Technologies has a $21.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Jeffrey Bronchick of Cove Street Capital, with a $13.1 million position; 2.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions encompass Touk Sinantha's AltraVue Capital, Chuck Royce's Royce & Associates and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to UFP Technologies, Inc. (NASDAQ:UFPT), around 2.68% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, setting aside 2.63 percent of its 13F equity portfolio to UFPT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified UFPT as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks similar to UFP Technologies, Inc. (NASDAQ:UFPT). We will take a look at Independent Bank Corporation (NASDAQ:IBCP), Urovant Sciences Ltd. (NASDAQ:UROV), Bridgewater Bancshares, Inc. (NASDAQ:BWB), and Endurance International Group Holdings Inc (NASDAQ:EIGI). This group of stocks' market values match UFPT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IBCP,12,26713,-1 UROV,7,48346,-6 BWB,8,18192,-2 EIGI,13,32611,-1 Average,10,31466,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $42 million in UFPT's case. Endurance International Group Holdings Inc (NASDAQ:EIGI) is the most popular stock in this table. On the other hand Urovant Sciences Ltd. (NASDAQ:UROV) is the least popular one with only 7 bullish hedge fund positions. UFP Technologies, Inc. (NASDAQ:UFPT) 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 UFPT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UFPT investors were disappointed as the stock returned 14.2% 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.