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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to UFP Technologies, Inc. (NASDAQ:UFPT) changed recently.
Is UFPT a good stock to buy now? UFP Technologies, Inc. (NASDAQ:UFPT) shareholders have witnessed an increase in support from the world's most elite money managers recently. UFP Technologies, Inc. (NASDAQ:UFPT) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 11. There were 7 hedge funds in our database with UFPT holdings at the end of June. Our calculations also showed that UFPT 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Jeffrey Bronchick of Cove Street Capital
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 review the latest hedge fund action regarding UFP Technologies, Inc. (NASDAQ:UFPT).
Do Hedge Funds Think UFPT Is A Good Stock To Buy Now?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in UFPT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in UFP Technologies, Inc. (NASDAQ:UFPT), which was worth $22.6 million at the end of the third quarter. On the second spot was Cove Street Capital which amassed $8.8 million worth of shares. AltraVue Capital, Royce & Associates, and Arrowstreet Capital 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 AltraVue Capital allocated the biggest weight to UFP Technologies, Inc. (NASDAQ:UFPT), around 2.44% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 1.66 percent of its 13F equity portfolio to UFPT.
As aggregate interest increased, some big names were breaking ground themselves. GLG Partners, managed by Noam Gottesman, created the biggest position in UFP Technologies, Inc. (NASDAQ:UFPT). GLG Partners had $0.5 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Cliff Asness's AQR Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as UFP Technologies, Inc. (NASDAQ:UFPT) but similarly valued. We will take a look at Bar Harbor Bankshares (NYSE:BHB), Business First Bancshares, Inc. (NASDAQ:BFST), DSP Group, Inc. (NASDAQ:DSPG), OptimizeRx Corporation (NASDAQ:OPRX), Meten EdtechX Education Group Ltd. (NASDAQ:METX), Conn's, Inc. (NASDAQ:CONN), and HBT Financial, Inc. (NASDAQ:HBT). This group of stocks' market caps are closest to UFPT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHB,2,4465,-1 BFST,3,9763,-2 DSPG,14,57122,-2 OPRX,4,28598,-1 METX,3,72,0 CONN,14,21354,-2 HBT,9,10415,3 Average,7,18827,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $42 million in UFPT's case. DSP Group, Inc. (NASDAQ:DSPG) is the most popular stock in this table. On the other hand Bar Harbor Bankshares (NYSE:BHB) is the least popular one with only 2 bullish hedge fund positions. UFP Technologies, Inc. (NASDAQ:UFPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UFPT is 68.6. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on UFPT as the stock returned 17.1% since the end of Q3 (through 12/8) 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.