In this article we will take a look at whether hedge funds think Universal Logistics Holdings, Inc. (NASDAQ:ULH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Universal Logistics Holdings, Inc. (NASDAQ:ULH) has experienced a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that ULH 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind we're going to review the new hedge fund action regarding Universal Logistics Holdings, Inc. (NASDAQ:ULH).
What does smart money think about Universal Logistics Holdings, Inc. (NASDAQ:ULH)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ULH over the last 18 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Is ULH A Good Stock To Buy?
More specifically, Royce & Associates was the largest shareholder of Universal Logistics Holdings, Inc. (NASDAQ:ULH), with a stake worth $7.7 million reported as of the end of September. Trailing Royce & Associates was AQR Capital Management, which amassed a stake valued at $3.2 million. Arrowstreet Capital, Millennium Management, and Citadel Investment Group 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 Royce & Associates allocated the biggest weight to Universal Logistics Holdings, Inc. (NASDAQ:ULH), around 0.1% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ULH.
Judging by the fact that Universal Logistics Holdings, Inc. (NASDAQ:ULH) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedge funds who were dropping their positions entirely in the first quarter. At the top of the heap, Michael Gelband's ExodusPoint Capital dumped the biggest stake of all the hedgies followed by Insider Monkey, valued at an estimated $0.5 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also sold off its stock, about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds in the first quarter.
Let's check out hedge fund activity in other stocks similar to Universal Logistics Holdings, Inc. (NASDAQ:ULH). We will take a look at Designer Brands Inc. (NYSE:DBI), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), Star Group L.P. (NYSE:SGU), and Rubius Therapeutics, Inc. (NASDAQ:RUBY). This group of stocks' market caps are similar to ULH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DBI,21,28950,-1 CRNX,11,166354,-1 SGU,8,65781,1 RUBY,4,878,-1 Average,11,65491,-0.5 [/table]
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $16 million in ULH's case. Designer Brands Inc. (NYSE:DBI) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 4 bullish hedge fund positions. Universal Logistics Holdings, Inc. (NASDAQ:ULH) 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 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 gained 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately ULH wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ULH investors were disappointed as the stock returned 19.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
