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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not UniFirst Corp (NYSE:UNF) makes for a good investment right now.
Is UNF a good stock to buy now? Hedge fund interest in UniFirst Corp (NYSE:UNF) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that UNF 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). At the end of this article we will also compare UNF to other stocks including Enstar Group Ltd. (NASDAQ:ESGR), Apache Corporation (NASDAQ:APA), and bluebird bio Inc (NASDAQ:BLUE) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Clint Carlson of Carlson 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 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 check out the key hedge fund action encompassing UniFirst Corp (NYSE:UNF).
Do Hedge Funds Think UNF Is A Good Stock To Buy Now?
At third quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in UNF a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Carlson Capital held the most valuable stake in UniFirst Corp (NYSE:UNF), which was worth $29.9 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $18 million worth of shares. Yost Capital Management, Lunia Capital, and Millennium Management 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 Yost Capital Management allocated the biggest weight to UniFirst Corp (NYSE:UNF), around 9.86% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, dishing out 2.26 percent of its 13F equity portfolio to UNF.
Seeing as UniFirst Corp (NYSE:UNF) has faced declining sentiment from hedge fund managers, it's easy to see that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Noam Gottesman's GLG Partners cut the largest investment of the 750 funds followed by Insider Monkey, valued at close to $2.9 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $0.7 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as UniFirst Corp (NYSE:UNF) but similarly valued. We will take a look at Enstar Group Ltd. (NASDAQ:ESGR), Apache Corporation (NASDAQ:APA), bluebird bio Inc (NASDAQ:BLUE), TCF Financial Corporation (NASDAQ:TCF), Flowserve Corporation (NYSE:FLS), Canada Goose Holdings Inc. (NYSE:GOOS), and Southwest Gas Holdings, Inc. (NYSE:SWX). This group of stocks' market caps are similar to UNF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESGR,13,343430,1 APA,42,508289,2 BLUE,35,322436,-2 TCF,11,60244,-3 FLS,19,197860,-11 GOOS,21,190815,1 SWX,16,77908,3 Average,22.4,242997,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $96 million in UNF's case. Apache Corporation (NASDAQ:APA) is the most popular stock in this table. On the other hand TCF Financial Corporation (NASDAQ:TCF) is the least popular one with only 11 bullish hedge fund positions. UniFirst Corp (NYSE:UNF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UNF is 41.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately UNF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UNF investors were disappointed as the stock returned 7% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.