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Is UEIC A Good Stock To Buy Now?

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Asma UL Husna
·6 min read
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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Universal Electronics Inc (NASDAQ:UEIC) based on those filings.

Is UEIC a good stock to buy now? Universal Electronics Inc (NASDAQ:UEIC) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. UEIC has seen a decrease in support from the world's most elite money managers in recent months. There were 11 hedge funds in our database with UEIC positions at the end of the second quarter. Our calculations also showed that UEIC isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a look at the fresh hedge fund action regarding Universal Electronics Inc (NASDAQ:UEIC).

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

At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in UEIC a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Universal Electronics Inc (NASDAQ:UEIC) was held by Renaissance Technologies, which reported holding $7.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $2.8 million position. Other investors bullish on the company included Millennium Management, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Universal Electronics Inc (NASDAQ:UEIC), around 0.02% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to UEIC.

Seeing as Universal Electronics Inc (NASDAQ:UEIC) has faced falling interest from the smart money, we can see that there is a sect of money managers who sold off their entire stakes in the third quarter. It's worth mentioning that Noam Gottesman's GLG Partners cut the biggest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $0.5 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund cut about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.

Let's now review hedge fund activity in other stocks similar to Universal Electronics Inc (NASDAQ:UEIC). These stocks are Aptose Biosciences Inc (NASDAQ:APTO), 89bio, Inc. (NASDAQ:ETNB), Nordic American Tankers Ltd (NYSE:NAT), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), Rite Aid Corporation (NYSE:RAD), Quotient Limited (NASDAQ:QTNT), and Odonate Therapeutics, Inc. (NASDAQ:ODT). All of these stocks' market caps match UEIC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APTO,21,200892,3 ETNB,20,261691,14 NAT,10,20214,5 SCHN,13,9841,2 RAD,10,31761,-2 QTNT,26,213732,9 ODT,17,253128,1 Average,16.7,141608,4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $19 million in UEIC's case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand Nordic American Tankers Ltd (NYSE:NAT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Universal Electronics Inc (NASDAQ:UEIC) is even less popular than NAT. Our overall hedge fund sentiment score for UEIC is 27.1. 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. Hedge funds clearly dropped the ball on UEIC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on UEIC as the stock returned 49.3% since Q3 (through December 8th) and outperformed the market by an even larger margin.

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

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