The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at United Fire Group, Inc. (NASDAQ:UFCS) from the perspective of those elite funds.
United Fire Group, Inc. (NASDAQ:UFCS) was in 11 hedge funds' portfolios at the end of December. UFCS investors should pay attention to an increase in enthusiasm from smart money lately. There were 8 hedge funds in our database with UFCS positions at the end of the previous quarter. Our calculations also showed that UFCS isn't among the 30 most popular stocks among hedge funds.
To most investors, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are over 8000 funds with their doors open today, We hone in on the leaders of this club, approximately 750 funds. These hedge fund managers administer the majority of the hedge fund industry's total asset base, and by following their inimitable picks, Insider Monkey has identified many investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We're going to take a look at the fresh hedge fund action regarding United Fire Group, Inc. (NASDAQ:UFCS).
Hedge fund activity in United Fire Group, Inc. (NASDAQ:UFCS)
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UFCS over the last 14 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in United Fire Group, Inc. (NASDAQ:UFCS) was held by Renaissance Technologies, which reported holding $10.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $3.9 million position. Other investors bullish on the company included Prospector Partners, Two Sigma Advisors, and GLG Partners.
Now, key hedge funds were leading the bulls' herd. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the most valuable call position in United Fire Group, Inc. (NASDAQ:UFCS). PEAK6 Capital Management had $0.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.3 million position during the quarter. The other funds with brand new UFCS positions are Brandon Haley's Holocene Advisors and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now take a look at hedge fund activity in other stocks similar to United Fire Group, Inc. (NASDAQ:UFCS). These stocks are Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), US Ecology Inc. (NASDAQ:ECOL), WMS Industries Inc. (NYSE:WMS), and Summit Materials Inc (NYSE:SUM). This group of 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 KNSA,8,151336,-1 ECOL,11,10350,1 WMS,17,298539,0 SUM,20,408215,-1 Average,14,217110,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $21 million in UFCS's case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) is the least popular one with only 8 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. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately UFCS wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); UFCS investors were disappointed as the stock returned -24.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.