Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. The S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Universal Insurance Holdings, Inc. (NYSEAMEX:UVE).
Is Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) a bargain? Investors who are in the know are turning less bullish. The number of bullish hedge fund positions fell by 7 lately. Our calculations also showed that UVE isn't among the 30 most popular stocks among hedge funds.
According to most stock holders, hedge funds are assumed to be worthless, old investment tools of the past. While there are more than 8000 funds with their doors open today, Our experts choose to focus on the crème de la crème of this group, approximately 750 funds. These investment experts oversee the majority of all hedge funds' total capital, and by following their best stock picks, Insider Monkey has identified several investment strategies that have historically beaten the market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We're going to take a gander at the key hedge fund action surrounding Universal Insurance Holdings, Inc. (NYSEAMEX:UVE).
How are hedge funds trading Universal Insurance Holdings, Inc. (NYSEAMEX:UVE)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards UVE over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) was held by AQR Capital Management, which reported holding $14.2 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $7.6 million position. Other investors bullish on the company included Stadium Capital Management, GLG Partners, and Royce & Associates.
Due to the fact that Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) has experienced declining sentiment from the smart money, it's safe to say that there exists a select few hedge funds that slashed their positions entirely in the third quarter. At the top of the heap, Brandon Haley's Holocene Advisors cut the largest position of all the hedgies followed by Insider Monkey, worth close to $0.6 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dropped about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 7 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to Universal Insurance Holdings, Inc. (NYSEAMEX:UVE). We will take a look at Golub Capital BDC Inc (NASDAQ:GBDC), Huron Consulting Group Inc. (NASDAQ:HURN), Skyline Champion Corporation (NYSE:SKY), and Esperion Therapeutics, Inc. (NASDAQ:ESPR). This group of stocks' market caps are closest to UVE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GBDC,8,29834,-2 HURN,11,25163,-2 SKY,24,218938,1 ESPR,14,211689,3 Average,14.25,121406,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $38 million in UVE's case. Skyline Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Golub Capital BDC Inc (NASDAQ:GBDC) is the least popular one with only 8 bullish hedge fund positions. Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) 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 UVE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UVE investors were disappointed as the stock returned -10% 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.