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Hedge Funds Are Warming Up To United Microelectronics Corp (UMC)

Asma UL Husna

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of United Microelectronics Corp (NYSE:UMC).

Is United Microelectronics Corp (NYSE:UMC) a buy, sell, or hold? Money managers are becoming hopeful. The number of bullish hedge fund positions rose by 1 recently. Our calculations also showed that UMC 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). UMC was in 15 hedge funds' portfolios at the end of March. There were 14 hedge funds in our database with UMC positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_746893" align="aligncenter" width="392"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest car rental companies to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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. Keeping this in mind let's review the key hedge fund action encompassing United Microelectronics Corp (NYSE:UMC).

How are hedge funds trading United Microelectronics Corp (NYSE:UMC)?

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in UMC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in United Microelectronics Corp (NYSE:UMC). Renaissance Technologies has a $39.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, which holds a $25.5 million position; 2.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions consist of Daniel S. Och's OZ Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and James Chen's Ovata Capital Management. In terms of the portfolio weights assigned to each position Ovata Capital Management allocated the biggest weight to United Microelectronics Corp (NYSE:UMC), around 2.83% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, setting aside 2.13 percent of its 13F equity portfolio to UMC.

As one would reasonably expect, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in United Microelectronics Corp (NYSE:UMC). Marshall Wace LLP had $0.1 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $0 million position during the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as United Microelectronics Corp (NYSE:UMC) but similarly valued. We will take a look at The New York Times Company (NYSE:NYT), Madison Square Garden Sports Corp. (NYSE:MSG), Athene Holding Ltd. (NYSE:ATH), and Ingredion Incorporated (NYSE:INGR). All of these stocks' market caps match UMC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NYT,33,1414913,-2 MSG,41,1449012,-2 ATH,32,841044,-3 INGR,18,177212,-5 Average,31,970545,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $971 million. That figure was $99 million in UMC's case. Madison Square Garden Sports Corp. (NYSE:MSG) is the most popular stock in this table. On the other hand Ingredion Incorporated (NYSE:INGR) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks United Microelectronics Corp (NYSE:UMC) is even less popular than INGR. Hedge funds dodged a bullet by taking a bearish stance towards UMC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately UMC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); UMC investors were disappointed as the stock returned 18.4% during the second quarter (through June 25th) 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 so far in 2020.

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

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