Did Hedge Funds Make The Right Call On Univar Solutions Inc (UNVR) ?
Abigail Fisher
6 min read
We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Univar Solutions Inc (NYSE:UNVR) and determine whether hedge funds skillfully traded this stock.
Univar Solutions Inc (NYSE:UNVR) investors should be aware of a decrease in hedge fund interest recently. UNVR was in 32 hedge funds' portfolios at the end of the first quarter of 2020. There were 43 hedge funds in our database with UNVR holdings at the end of the previous quarter. Our calculations also showed that UNVR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be unimportant, old investment tools of years past. While there are greater than 8000 funds with their doors open today, Our experts choose to focus on the crème de la crème of this club, about 850 funds. These hedge fund managers control the lion's share of the smart money's total asset base, and by keeping an eye on their first-class investments, Insider Monkey has revealed a few investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the new hedge fund action surrounding Univar Solutions Inc (NYSE:UNVR).
How have hedgies been trading Univar Solutions Inc (NYSE:UNVR)?
At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 42 hedge funds with a bullish position in UNVR a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, First Pacific Advisors LLC was the largest shareholder of Univar Solutions Inc (NYSE:UNVR), with a stake worth $111.5 million reported as of the end of September. Trailing First Pacific Advisors LLC was FPR Partners, which amassed a stake valued at $101.5 million. Longview Asset Management, Iridian Asset Management, and Lyrical Asset 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 Bayberry Capital Partners allocated the biggest weight to Univar Solutions Inc (NYSE:UNVR), around 5.48% of its 13F portfolio. Legion Partners Asset Management is also relatively very bullish on the stock, setting aside 4.9 percent of its 13F equity portfolio to UNVR.
Since Univar Solutions Inc (NYSE:UNVR) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedgies who sold off their full holdings in the first quarter. Intriguingly, Larry Robbins's Glenview Capital said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising about $139.8 million in stock, and Zach Schreiber's Point State Capital was right behind this move, as the fund sold off about $54 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 11 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Univar Solutions Inc (NYSE:UNVR) but similarly valued. These stocks are EQT Corporation (NYSE:EQT), CNO Financial Group Inc (NYSE:CNO), Vicor Corp (NASDAQ:VICR), and Nelnet, Inc. (NYSE:NNI). This group of stocks' market caps resemble UNVR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EQT,30,234166,1 CNO,15,218787,-8 VICR,14,31916,2 NNI,13,81943,-1 Average,18,141703,-1.5 [/table]
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $687 million in UNVR's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Univar Solutions Inc (NYSE:UNVR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on UNVR as the stock returned 57.3% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
