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Was The Smart Money Right About United Rentals (URI)?

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With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was United Rentals, Inc. (NYSE:URI).

United Rentals, Inc. (NYSE:URI) was in 46 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. URI investors should pay attention to an increase in activity from the world's largest hedge funds lately. There were 40 hedge funds in our database with URI positions at the end of the third quarter. Our calculations also showed that URI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

CAPITAL GROWTH MANAGEMENT
CAPITAL GROWTH MANAGEMENT

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind we're going to take a glance at the latest hedge fund action regarding United Rentals, Inc. (NYSE:URI).

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

At the end of the fourth quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards URI over the last 22 quarters. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is URI A Good Stock To Buy?
Is URI A Good Stock To Buy?

The largest stake in United Rentals, Inc. (NYSE:URI) was held by Lyrical Asset Management, which reported holding $407.8 million worth of stock at the end of December. It was followed by Pelham Capital with a $187.3 million position. Other investors bullish on the company included Theleme Partners, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to United Rentals, Inc. (NYSE:URI), around 12.4% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, setting aside 5.63 percent of its 13F equity portfolio to URI.

Consequently, key hedge funds have jumped into United Rentals, Inc. (NYSE:URI) headfirst. Pelham Capital, managed by Ross Turner, created the most valuable position in United Rentals, Inc. (NYSE:URI). Pelham Capital had $187.3 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $41.3 million position during the quarter. The other funds with brand new URI positions are Ken Heebner's Capital Growth Management, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Phill Gross and Robert Atchinson's Adage Capital Management.

Let's check out hedge fund activity in other stocks similar to United Rentals, Inc. (NYSE:URI). We will take a look at Halliburton Company (NYSE:HAL), Trimble Inc. (NASDAQ:TRMB), Zendesk Inc (NYSE:ZEN), Energy Transfer L.P. (NYSE:ET), HEICO Corporation (NYSE:HEI), Invitation Homes Inc. (NYSE:INVH), and FirstEnergy Corp. (NYSE:FE). This group of stocks' market caps are similar to URI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HAL,31,1027399,-1 TRMB,21,1330232,-14 ZEN,58,1858196,-1 ET,25,543271,-6 HEI,44,786027,1 INVH,27,833637,-1 FE,50,1305329,-9 Average,36.6,1097727,-4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1098 million. That figure was $1061 million in URI's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Trimble Inc. (NASDAQ:TRMB) is the least popular one with only 21 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 67.2. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on URI as the stock returned 38% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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