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Is UFCS 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 United Fire Group, Inc. (NASDAQ:UFCS) based on those filings.

Is UFCS a good stock to buy now? United Fire Group, Inc. (NASDAQ:UFCS) was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. UFCS investors should be aware of an increase in hedge fund sentiment lately. There were 6 hedge funds in our database with UFCS holdings at the end of June. Our calculations also showed that UFCS 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.

If you'd ask most traders, hedge funds are seen as underperforming, outdated financial tools of years past. While there are more than 8000 funds in operation at present, Our experts look at the top tier of this group, about 850 funds. These hedge fund managers watch over the lion's share of the smart money's total capital, and by observing their inimitable stock picks, Insider Monkey has identified various investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind we're going to check out the latest hedge fund action encompassing United Fire Group, Inc. (NASDAQ:UFCS).

How have hedgies been trading United Fire Group, Inc. (NASDAQ:UFCS)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UFCS over the last 21 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in United Fire Group, Inc. (NASDAQ:UFCS). Renaissance Technologies has a $4.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $2.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Tudor Investment Corp allocated the biggest weight to United Fire Group, Inc. (NASDAQ:UFCS), around 0.01% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to UFCS.

As industrywide interest jumped, key hedge funds have jumped into United Fire Group, Inc. (NASDAQ:UFCS) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in United Fire Group, Inc. (NASDAQ:UFCS). Arrowstreet Capital had $2.2 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new UFCS position is Chuck Royce's Royce & Associates.

Let's check out hedge fund activity in other stocks similar to United Fire Group, Inc. (NASDAQ:UFCS). These stocks are Banc of California, Inc. (NYSE:BANC), PBF Logistics LP (NYSE:PBFX), U.S. Lime & Minerals Inc. (NASDAQ:USLM), TORM plc (NASDAQ:TRMD), Community Health Systems, Inc. (NYSE:CYH), IVERIC bio, Inc. (NASDAQ:ISEE), and Brigham Minerals, Inc. (NYSE:MNRL). All of these stocks' market caps are closest to UFCS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BANC,13,32302,0 PBFX,3,2908,-1 USLM,5,39228,1 TRMD,3,362385,0 CYH,22,194242,4 ISEE,26,278032,-5 MNRL,19,75169,3 Average,13,140609,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $11 million in UFCS's case. IVERIC bio, Inc. (NASDAQ:ISEE) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 3 bullish hedge fund positions. United Fire Group, Inc. (NASDAQ:UFCS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UFCS is 37.9. 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 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on UFCS as the stock returned 13.2% since the end of the third quarter (through 12/2) 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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