Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Universal Forest Products, Inc. (NASDAQ:UFPI) from the perspective of those elite funds.
Universal Forest Products, Inc. (NASDAQ:UFPI) was in 20 hedge funds' portfolios at the end of September. UFPI has seen an increase in activity from the world's largest hedge funds of late. There were 17 hedge funds in our database with UFPI holdings at the end of the previous quarter. Our calculations also showed that UFPI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_221556" align="aligncenter" width="600"] Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the recent hedge fund action regarding Universal Forest Products, Inc. (NASDAQ:UFPI).
What have hedge funds been doing with Universal Forest Products, Inc. (NASDAQ:UFPI)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UFPI over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Universal Forest Products, Inc. (NASDAQ:UFPI), which was worth $23 million at the end of the third quarter. On the second spot was SG Capital Management which amassed $13.8 million worth of shares. GLG Partners, Citadel Investment Group, and Renaissance Technologies 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 SG Capital Management allocated the biggest weight to Universal Forest Products, Inc. (NASDAQ:UFPI), around 2.62% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.98 percent of its 13F equity portfolio to UFPI.
As one would reasonably expect, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the biggest position in Universal Forest Products, Inc. (NASDAQ:UFPI). Millennium Management had $3.6 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $3.1 million investment in the stock during the quarter. The other funds with brand new UFPI positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Dmitry Balyasny's Balyasny Asset Management, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Universal Forest Products, Inc. (NASDAQ:UFPI) but similarly valued. We will take a look at Box, Inc. (NYSE:BOX), Allegiant Travel Company (NASDAQ:ALGT), Werner Enterprises, Inc. (NASDAQ:WERN), and The Chemours Company (NYSE:CC). This group of stocks' market values are closest to UFPI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOX,31,553721,4 ALGT,16,530035,-2 WERN,18,112767,3 CC,29,273189,1 Average,23.5,367428,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $79 million in UFPI's case. Box, Inc. (NYSE:BOX) is the most popular stock in this table. On the other hand Allegiant Travel Company (NASDAQ:ALGT) is the least popular one with only 16 bullish hedge fund positions. Universal Forest Products, Inc. (NASDAQ:UFPI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on UFPI as the stock returned 24.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.