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Here is What Hedge Funds Think About United Rentals, Inc. (URI)

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In this article we will analyze whether United Rentals, Inc. (NYSE:URI) 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 by double digits annually.

Is United Rentals, Inc. (NYSE:URI) the right pick for your portfolio? Hedge funds were becoming less confident. The number of bullish hedge fund bets shrunk by 5 recently. United Rentals, Inc. (NYSE:URI) was in 41 hedge funds' portfolios at the end of March. The all time high for this statistic is 59. Our calculations also showed that URI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 46 hedge funds in our database with URI holdings at the end of December.

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Rick Gerson
Rick Gerson

Richard Gerson of Falcon Edge Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the new hedge fund action surrounding United Rentals, Inc. (NYSE:URI).

Do Hedge Funds Think URI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in URI over the last 23 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Lyrical Asset Management was the largest shareholder of United Rentals, Inc. (NYSE:URI), with a stake worth $550.8 million reported as of the end of March. Trailing Lyrical Asset Management was Pelham Capital, which amassed a stake valued at $120.6 million. Citadel Investment Group, Holocene Advisors, and PEAK6 Capital Management 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 Pelham Capital allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 7.48% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 6.47 percent of its 13F equity portfolio to URI.

Judging by the fact that United Rentals, Inc. (NYSE:URI) has faced a decline in interest from the smart money, we can see that there were a few funds that elected to cut their entire stakes last quarter. At the top of the heap, Patrick Degorce's Theleme Partners cut the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $142.3 million in stock. Ken Griffin's fund, Citadel Investment Group, also said goodbye to its stock, about $46 million worth. These transactions are interesting, as total hedge fund interest dropped by 5 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to United Rentals, Inc. (NYSE:URI). We will take a look at Canon Inc. (NYSE:CAJ), Synchrony Financial (NYSE:SYF), Coca-Cola Europacific Partners plc (NYSE:CCEP), Realty Income Corporation (NYSE:O), Slack Technologies Inc (NYSE:WORK), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), and CDW Corporation (NASDAQ:CDW). This group of stocks' market caps match URI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAJ,9,59274,2 SYF,49,1861601,-1 CCEP,25,1110385,-3 O,18,183624,-6 WORK,60,4262404,-6 TLK,4,158462,0 CDW,30,1908866,-13 Average,27.9,1363517,-3.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1364 million. That figure was $1022 million in URI's case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. United Rentals, Inc. (NYSE:URI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for URI is 53.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately URI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on URI were disappointed as the stock returned -12.3% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.