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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Ubiquiti Inc. (NYSE:UI) based on that data.
Is Ubiquiti Inc. (NYSE:UI) going to take off soon? The best stock pickers were taking a bearish view. The number of long hedge fund positions shrunk by 9 in recent months. Ubiquiti Inc. (NYSE:UI) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 29. Our calculations also showed that UI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 29 hedge funds in our database with UI positions at the end of the second quarter.
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a gander at the fresh hedge fund action regarding Ubiquiti Inc. (NYSE:UI).
Do Hedge Funds Think UI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UI over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ubiquiti Inc. (NYSE:UI), which was worth $121.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $25.7 million worth of shares. D E Shaw, Harspring Capital Management, and GLG Partners 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 Harspring Capital Management allocated the biggest weight to Ubiquiti Inc. (NYSE:UI), around 4.29% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, earmarking 0.48 percent of its 13F equity portfolio to UI.
Since Ubiquiti Inc. (NYSE:UI) has experienced declining sentiment from the smart money, it's easy to see that there is a sect of hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, Campbell Wilson's Old Well Partners cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $1.6 million in stock. Greg Poole's fund, Echo Street Capital Management, also sold off its stock, about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 9 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Ubiquiti Inc. (NYSE:UI). We will take a look at Advance Auto Parts, Inc. (NYSE:AAP), Halliburton Company (NYSE:HAL), Eastman Chemical Company (NYSE:EMN), Vipshop Holdings Limited (NYSE:VIPS), James Hardie Industries plc (NYSE:JHX), CNH Industrial NV (NYSE:CNHI), and CenterPoint Energy, Inc. (NYSE:CNP). This group of stocks' market caps are similar to UI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAP,42,1618939,-5 HAL,32,676988,2 EMN,27,183978,0 VIPS,24,268749,-4 JHX,4,11513,-1 CNHI,18,289206,1 CNP,20,413380,-10 Average,23.9,494679,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $495 million. That figure was $205 million in UI's case. Advance Auto Parts, Inc. (NYSE:AAP) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. Ubiquiti Inc. (NYSE:UI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UI is 37.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on UI as the stock returned 52.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.