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Were Hedge Funds Right About Union Pacific Corporation (UNP)?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Union Pacific Corporation (NYSE:UNP).

Is Union Pacific Corporation (NYSE:UNP) ready to rally soon? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund positions inched up by 7 recently. Union Pacific Corporation (NYSE:UNP) was in 75 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 74. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UNP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 68 hedge funds in our database with UNP holdings at the end of December.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Aaron Cowen Suvretta Capital
Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let's view the latest hedge fund action encompassing Union Pacific Corporation (NYSE:UNP).

Do Hedge Funds Think UNP Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 75 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 63 hedge funds with a bullish position in UNP a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UNP A Good Stock To Buy?
Is UNP A Good Stock To Buy?

More specifically, TCI Fund Management was the largest shareholder of Union Pacific Corporation (NYSE:UNP), with a stake worth $1326.1 million reported as of the end of March. Trailing TCI Fund Management was Fisher Asset Management, which amassed a stake valued at $982.5 million. Soroban Capital Partners, Citadel Investment Group, and Suvretta Capital Management 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 White Square Capital allocated the biggest weight to Union Pacific Corporation (NYSE:UNP), around 8.04% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, dishing out 7.99 percent of its 13F equity portfolio to UNP.

Consequently, key hedge funds have been driving this bullishness. Skye Global Management, managed by Jaime Sterne, initiated the most valuable position in Union Pacific Corporation (NYSE:UNP). Skye Global Management had $77.5 million invested in the company at the end of the quarter. Zach Schreiber's Point State Capital also initiated a $57.3 million position during the quarter. The other funds with brand new UNP positions are Alexander Mitchell's Scopus Asset Management, Frank Fu's CaaS Capital, and Greg Poole's Echo Street Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Union Pacific Corporation (NYSE:UNP) but similarly valued. These stocks are The Unilever Group (NYSE:UL), Linde plc (NYSE:LIN), BHP Group (NYSE:BBL), Morgan Stanley (NYSE:MS), SAP SE (NYSE:SAP), Amgen, Inc. (NASDAQ:AMGN), and HDFC Bank Limited (NYSE:HDB). This group of stocks' market caps match UNP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UL,20,826829,-5 LIN,43,4636270,-7 BBL,23,1353821,5 MS,79,5285168,13 SAP,19,1473996,5 AMGN,47,1001957,-2 HDB,27,1964796,-4 Average,36.9,2363262,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $2363 million. That figure was $4685 million in UNP's case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 19 bullish hedge fund positions. Union Pacific Corporation (NYSE:UNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNP is 86.7. 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. 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 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 25.8% in 2021 through August 6th and beat the market again by 6.7 percentage points. Unfortunately UNP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on UNP were disappointed as the stock returned 0.5% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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