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Is United Parcel Service, Inc. (UPS) Going to Burn These Hedge Funds?

Nina Todic

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards United Parcel Service, Inc. (NYSE:UPS).

Is United Parcel Service, Inc. (NYSE:UPS) a buy, sell, or hold? Prominent investors are in an optimistic mood. The number of long hedge fund bets increased by 5 recently. Our calculations also showed that UPS isn't among the 30 most popular stocks among hedge funds. UPS was in 41 hedge funds' portfolios at the end of September. There were 36 hedge funds in our database with UPS holdings at the end of the previous quarter.

In the 21st century investor’s toolkit there are tons of metrics market participants put to use to appraise publicly traded companies. A couple of the less known metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outclass their index-focused peers by a superb amount (see the details here).

[caption id="attachment_670377" align="aligncenter" width="473"] Aaron Cowen of Suvretta Capital Management[/caption]

Aaron Cowen Suvretta Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the new hedge fund action surrounding United Parcel Service, Inc. (NYSE:UPS).

How have hedgies been trading United Parcel Service, Inc. (NYSE:UPS)?

At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in UPS a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds with UPS Positions

The largest stake in United Parcel Service, Inc. (NYSE:UPS) was held by Bill & Melinda Gates Foundation Trust, which reported holding $542.2 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $192.9 million position. Other investors bullish on the company included Suvretta Capital Management, Adage Capital Management, and Impala Asset Management. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to United Parcel Service, Inc. (NYSE:UPS), around 6.22% of its portfolio. Suvretta Capital Management is also relatively very bullish on the stock, dishing out 3.66 percent of its 13F equity portfolio to UPS.

Consequently, key money managers have been driving this bullishness. Suvretta Capital Management, managed by Aaron Cowen, created the most outsized position in United Parcel Service, Inc. (NYSE:UPS). Suvretta Capital Management had $141.5 million invested in the company at the end of the quarter. Robert Bishop's Impala Asset Management also made a $86.1 million investment in the stock during the quarter. The following funds were also among the new UPS investors: Aaron Cowen's Suvretta Capital Management, Renaissance Technologies, and Dmitry Balyasny's Balyasny Asset Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as United Parcel Service, Inc. (NYSE:UPS) but similarly valued. We will take a look at American Express Company (NYSE:AXP), American Tower Corporation (REIT) (NYSE:AMT), Diageo plc (NYSE:DEO), and 3M Company (NYSE:MMM). All of these stocks' market caps resemble UPS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXP,48,21377087,3 AMT,46,3645628,4 DEO,22,930335,7 MMM,45,825815,5 Average,40.25,6694716,4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $6695 million. That figure was $1366 million in UPS's case. American Express Company (NYSE:AXP) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 bullish hedge fund positions. United Parcel Service, Inc. (NYSE:UPS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately UPS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on UPS were disappointed as the stock returned 0.4% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

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