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In this article you are going to find out whether hedge funds think Ultralife Corp. (NASDAQ:ULBI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Ultralife Corp. (NASDAQ:ULBI) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Severn Bancorp Inc (NASDAQ:SVBI), Five Prime Therapeutics Inc (NASDAQ:FPRX), and Escalade, Inc. (NASDAQ:ESCA) to gather more data points. Our calculations also showed that ULBI 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="399"]
Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's view the latest hedge fund action surrounding Ultralife Corp. (NASDAQ:ULBI).
What have hedge funds been doing with Ultralife Corp. (NASDAQ:ULBI)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in ULBI a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Ultralife Corp. (NASDAQ:ULBI) was held by Renaissance Technologies, which reported holding $1.2 million worth of stock at the end of September. It was followed by Ancora Advisors with a $0.3 million position. The only other hedge fund that is bullish on the company was Millennium Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ultralife Corp. (NASDAQ:ULBI) but similarly valued. These stocks are Severn Bancorp Inc (NASDAQ:SVBI), Five Prime Therapeutics Inc (NASDAQ:FPRX), Escalade, Inc. (NASDAQ:ESCA), and Platinum Group Metals Limited (NYSE:PLG). This group of stocks' market valuations resemble ULBI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SVBI,4,11769,0 FPRX,16,29194,-3 ESCA,3,5879,0 PLG,3,3650,0 Average,6.5,12623,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $2 million in ULBI's case. Five Prime Therapeutics Inc (NASDAQ:FPRX) is the most popular stock in this table. On the other hand Escalade, Inc. (NASDAQ:ESCA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Ultralife Corp. (NASDAQ:ULBI) is even less popular than ESCA. Hedge funds clearly dropped the ball on ULBI as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on ULBI as the stock returned 63.1% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.