In this article we will check out the progression of hedge fund sentiment towards Under Armour Inc (NYSE:UA) 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.
Is Under Armour Inc (NYSE:UA) worth your attention right now? Investors who are in the know are getting more bullish. The number of bullish hedge fund positions increased by 5 in recent months. Our calculations also showed that UA 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). UA was in 37 hedge funds' portfolios at the end of the first quarter of 2020. There were 32 hedge funds in our database with UA holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 51 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_256989" align="aligncenter" width="397"] Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 latest hedge fund action encompassing Under Armour Inc (NYSE:UA).
Hedge fund activity in Under Armour Inc (NYSE:UA)
At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in UA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Under Armour Inc (NYSE:UA) was held by Lone Pine Capital, which reported holding $160.5 million worth of stock at the end of September. It was followed by Adage Capital Management with a $129.3 million position. Other investors bullish on the company included Adage Capital Management, Lone Pine Capital, and Bares Capital Management. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Under Armour Inc (NYSE:UA), around 2.63% of its 13F portfolio. Lone Pine Capital is also relatively very bullish on the stock, designating 0.95 percent of its 13F equity portfolio to UA.
Consequently, key money managers have jumped into Under Armour Inc (NYSE:UA) headfirst. Lone Pine Capital, established the most outsized position in Under Armour Inc (NYSE:UA). Lone Pine Capital had $79.7 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $13.3 million position during the quarter. The following funds were also among the new UA investors: Israel Englander's Millennium Management, Renaissance Technologies, and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks similar to Under Armour Inc (NYSE:UA). We will take a look at Primerica, Inc. (NYSE:PRI), Everbridge, Inc. (NASDAQ:EVBG), Helen of Troy Limited (NASDAQ:HELE), and Healthequity Inc (NASDAQ:HQY). All of these stocks' market caps match UA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRI,23,303962,-5 EVBG,31,796566,-6 HELE,16,135725,-1 HQY,19,96054,-4 Average,22.25,333077,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $661 million in UA's case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Under Armour Inc (NYSE:UA) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately UA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on UA were disappointed as the stock returned -2.5% during the second quarter (through the end of May) 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.