Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Unifi, Inc. (NYSE:UFI).
Today there are dozens of formulas shareholders use to size up their stock investments. A duo of the less known formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat their index-focused peers by a very impressive margin (see the details here).
We're going to go over the recent hedge fund action encompassing Unifi, Inc. (NYSE:UFI).
What does smart money think about Unifi, Inc. (NYSE:UFI)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in UFI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Unifi, Inc. (NYSE:UFI) was held by Impala Asset Management, which reported holding $30.6 million worth of stock at the end of March. It was followed by ValueAct Capital with a $21.9 million position. Other investors bullish on the company included Royce & Associates, D E Shaw, and Citadel Investment Group.
Consequently, key hedge funds were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Unifi, Inc. (NYSE:UFI). Citadel Investment Group had $1 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs's Wexford Capital also made a $0.2 million investment in the stock during the quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Unifi, Inc. (NYSE:UFI) but similarly valued. These stocks are Fiesta Restaurant Group Inc (NASDAQ:FRGI), Motorcar Parts of America, Inc. (NASDAQ:MPAA), NI Holdings, Inc. (NASDAQ:NODK), and Karyopharm Therapeutics Inc (NASDAQ:KPTI). This group of stocks' market caps are closest to UFI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRGI,18,94240,-2 MPAA,9,93844,-1 NODK,6,24094,-1 KPTI,15,103954,-2 Average,12,79033,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $69 million in UFI's case. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is the most popular stock in this table. On the other hand NI Holdings, Inc. (NASDAQ:NODK) is the least popular one with only 6 bullish hedge fund positions. Unifi, Inc. (NYSE:UFI) is not the least popular stock in this group but hedge fund interest is still below average. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately UFI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UFI investors were disappointed as the stock returned -7.6% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.