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Was The Smart Money Right About United Parcel Service, Inc. (UPS)?

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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 Parcel Service, Inc. (NYSE:UPS).

United Parcel Service, Inc. (NYSE:UPS) has experienced an increase in activity from the world's largest hedge funds in recent months. United Parcel Service, Inc. (NYSE:UPS) was in 52 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 57. Our calculations also showed that UPS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In today’s marketplace there are a lot of indicators investors employ to value stocks. Two of the less known indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can outperform the market by a solid margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Now we're going to take a glance at the latest hedge fund action regarding United Parcel Service, Inc. (NYSE:UPS).

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

At Q2's end, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in UPS over the last 24 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is UPS A Good Stock To Buy?
Is UPS A Good Stock To Buy?

Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in United Parcel Service, Inc. (NYSE:UPS), which was worth $582.7 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $395.7 million worth of shares. Two Sigma Advisors, Renaissance Technologies, and D E Shaw 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 Cartenna Capital allocated the biggest weight to United Parcel Service, Inc. (NYSE:UPS), around 2.89% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, designating 2.45 percent of its 13F equity portfolio to UPS.

As aggregate interest increased, some big names have been driving this bullishness. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, established the biggest position in United Parcel Service, Inc. (NYSE:UPS). Shellback Capital had $31.2 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $27.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Avellone's Cartenna Capital, Gregg Moskowitz's Interval Partners, and Donald Sussman's Paloma Partners.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as United Parcel Service, Inc. (NYSE:UPS) but similarly valued. We will take a look at T-Mobile US, Inc. (NYSE:TMUS), Texas Instruments Incorporated (NASDAQ:TXN), Costco Wholesale Corporation (NASDAQ:COST), McDonald's Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Medtronic plc (NYSE:MDT), and SAP SE (NYSE:SAP). All of these stocks' market caps match UPS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMUS,100,8020682,2 TXN,50,2468540,8 COST,54,4321174,-2 MCD,66,2714779,-1 MS,69,5347633,-10 MDT,68,3390607,3 SAP,17,1603691,-2 Average,60.6,3981015,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.6 hedge funds with bullish positions and the average amount invested in these stocks was $3981 million. That figure was $2189 million in UPS's case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 17 bullish hedge fund positions. United Parcel Service, Inc. (NYSE:UPS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UPS is 58.5. 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 negative signal and 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately UPS wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UPS investors were disappointed as the stock returned 0.6% since the end of June (through 11/5) 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 most of these stocks already outperformed the market in 2021.

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