We can judge whether Ubiquiti Networks Inc (NASDAQ:UBNT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Ubiquiti Networks Inc (NASDAQ:UBNT) undervalued? Hedge funds are getting less optimistic. The number of long hedge fund positions went down by 2 in recent months. Our calculations also showed that ubnt isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We're going to take a look at the key hedge fund action encompassing Ubiquiti Networks Inc (NASDAQ:UBNT).
What have hedge funds been doing with Ubiquiti Networks Inc (NASDAQ:UBNT)?
Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in UBNT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Ubiquiti Networks Inc (NASDAQ:UBNT), which was worth $401.2 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $116.7 million worth of shares. Moreover, D E Shaw, Bandera Partners, and AQR Capital Management were also bullish on Ubiquiti Networks Inc (NASDAQ:UBNT), allocating a large percentage of their portfolios to this stock.
Due to the fact that Ubiquiti Networks Inc (NASDAQ:UBNT) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers who were dropping their positions entirely by the end of the third quarter. Interestingly, John Overdeck and David Siegel's Two Sigma Advisors said goodbye to the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $4.2 million in stock. Daniel S. Och's fund, OZ Management, also sold off its stock, about $2.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Ubiquiti Networks Inc (NASDAQ:UBNT). We will take a look at Lennox International Inc. (NYSE:LII), Eastman Chemical Company (NYSE:EMN), The Mosaic Company (NYSE:MOS), and Burlington Stores Inc (NYSE:BURL). This group of stocks' market caps are similar to UBNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LII,19,138812,-5 EMN,30,518981,-3 MOS,29,770708,-8 BURL,31,1351671,1 Average,27.25,695043,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $668 million in UBNT's case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Lennox International Inc. (NYSE:LII) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Ubiquiti Networks Inc (NASDAQ:UBNT) is even less popular than LII. Hedge funds dodged a bullet by taking a bearish stance towards UBNT. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately UBNT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); UBNT investors were disappointed as the stock returned -12.2% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.