Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Unisys Corporation (NYSE:UIS) to find out whether there were any major changes in hedge funds' views.
Is UIS a good stock to buy now? Unisys Corporation (NYSE:UIS) has experienced a decrease in activity from the world's largest hedge funds recently. Unisys Corporation (NYSE:UIS) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 26. There were 19 hedge funds in our database with UIS holdings at the end of June. Our calculations also showed that UIS 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.
At the moment there are numerous indicators investors use to size up their stock investments. Some of the less known indicators are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outclass the S&P 500 by a solid margin (see the details here).
Chuck Royce of Royce & Associates
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. Now let's take a glance at the latest hedge fund action encompassing Unisys Corporation (NYSE:UIS).
Do Hedge Funds Think UIS Is A Good Stock To Buy Now?
At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the second quarter of 2020. By comparison, 26 hedge funds held shares or bullish call options in UIS a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Unisys Corporation (NYSE:UIS), which was worth $14.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $13.6 million worth of shares. Arrowstreet Capital, Rutabaga Capital Management, and Harvey Partners 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 Harvey Partners allocated the biggest weight to Unisys Corporation (NYSE:UIS), around 5.65% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, designating 2.72 percent of its 13F equity portfolio to UIS.
Since Unisys Corporation (NYSE:UIS) has experienced a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that decided to sell off their full holdings by the end of the third quarter. Intriguingly, George Soros's Soros Fund Management sold off the largest position of all the hedgies watched by Insider Monkey, totaling close to $5.6 million in stock. Alec Litowitz and Ross Laser's fund, Magnetar Capital, also dumped its stock, about $2.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Unisys Corporation (NYSE:UIS). These stocks are MGP Ingredients Inc (NASDAQ:MGPI), The Shyft Group, Inc. (NASDAQ:SHYF), Kadmon Holdings, Inc. (NASDAQ:KDMN), Solar Capital Ltd. (NASDAQ:SLRC), Federal Agricultural Mortgage Corp. (NYSE:AGM), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), and IES Holdings, Inc. (NASDAQ:IESC). This group of stocks' market values resemble UIS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGPI,11,19354,-2 SHYF,13,71919,-5 KDMN,24,304665,-5 SLRC,12,20556,0 AGM,11,13712,3 HOLI,13,75165,3 IESC,9,412002,1 Average,13.3,131053,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $56 million in UIS's case. Kadmon Holdings, Inc. (NYSE:KDMN) is the most popular stock in this table. On the other hand IES Holdings, Inc. (NASDAQ:IESC) is the least popular one with only 9 bullish hedge fund positions. Unisys Corporation (NYSE:UIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UIS is 32.8. 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 UIS as the stock returned 58.8% 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.