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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Univar Solutions Inc (NYSE:UNVR).
Is UNVR a good stock to buy? Univar Solutions Inc (NYSE:UNVR) has seen a decrease in hedge fund sentiment lately. Univar Solutions Inc (NYSE:UNVR) was in 25 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 43. There were 31 hedge funds in our database with UNVR positions at the end of the fourth quarter. Our calculations also showed that UNVR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Harold Levy of Iridian Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a peek at the fresh hedge fund action regarding Univar Solutions Inc (NYSE:UNVR).
Do Hedge Funds Think UNVR Is A Good Stock To Buy Now?
At Q1's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in UNVR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Andrew Wellington and Jeff Keswin's Lyrical Asset Management has the biggest position in Univar Solutions Inc (NYSE:UNVR), worth close to $156.2 million, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $133.3 million position; 2.3% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Robert Rodriguez and Steven Romick's First Pacific Advisors LLC, Bob Peck and Andy Raab's FPR Partners and David Paradice's Paradice Investment Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Univar Solutions Inc (NYSE:UNVR), around 13.5% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, dishing out 3.16 percent of its 13F equity portfolio to UNVR.
Seeing as Univar Solutions Inc (NYSE:UNVR) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds who sold off their entire stakes by the end of the first quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $14.8 million in stock. Angela Aldrich's fund, Bayberry Capital Partners, also said goodbye to its stock, about $14 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Univar Solutions Inc (NYSE:UNVR). These stocks are Nektar Therapeutics (NASDAQ:NKTR), Desktop Metal, Inc. (NYSE:DM), Sleep Number Corporation (NASDAQ:SNBR), Urban Outfitters, Inc. (NASDAQ:URBN), Investors Bancorp, Inc. (NASDAQ:ISBC), Beacon Roofing Supply, Inc. (NASDAQ:BECN), and Cannae Holdings, Inc. (NYSE:CNNE). This group of stocks' market values are similar to UNVR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NKTR,18,234537,-1 DM,20,216231,-4 SNBR,21,256554,5 URBN,23,140764,-1 ISBC,12,78620,-12 BECN,21,411376,-2 CNNE,36,672726,2 Average,21.6,287258,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $742 million in UNVR's case. Cannae Holdings, Inc. (NYSE:CNNE) is the most popular stock in this table. On the other hand Investors Bancorp, Inc. (NASDAQ:ISBC) is the least popular one with only 12 bullish hedge fund positions. Univar Solutions Inc (NYSE:UNVR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNVR is 43.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on UNVR, though not to the same extent, as the stock returned 14.3% since Q1 (through July 9th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.