Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in United Community Banks Inc (NASDAQ:UCBI)? The smart money sentiment can provide an answer to this question.
Is UCBI a good stock to buy now? United Community Banks Inc (NASDAQ:UCBI) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 19. UCBI shareholders have witnessed a decrease in support from the world's most elite money managers lately. There were 17 hedge funds in our database with UCBI holdings at the end of June. Our calculations also showed that UCBI 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of metrics shareholders put to use to grade their holdings. A couple of the most useful metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can trounce their index-focused peers by a superb amount (see the details here).
Noam Gottesman GLG Partners
Noam Gottesman of GLG Partners
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. Now let's take a gander at the new hedge fund action encompassing United Community Banks Inc (NASDAQ:UCBI).
Do Hedge Funds Think UCBI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UCBI over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the number one position in United Community Banks Inc (NASDAQ:UCBI), worth close to $9.9 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is GLG Partners, led by Noam Gottesman, holding a $7.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position JCSD Capital allocated the biggest weight to United Community Banks Inc (NASDAQ:UCBI), around 2.06% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to UCBI.
Because United Community Banks Inc (NASDAQ:UCBI) has faced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds that decided to sell off their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the biggest position of the 750 funds tracked by Insider Monkey, worth an estimated $1.5 million in stock. Greg Eisner's fund, Engineers Gate Manager, also dumped its stock, about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to United Community Banks Inc (NASDAQ:UCBI). We will take a look at WestAmerica Bancorp. (NASDAQ:WABC), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), MicroStrategy Incorporated (NASDAQ:MSTR), La-Z-Boy Incorporated (NYSE:LZB), Onto Innovation Inc. (NYSE:ONTO), Health Catalyst, Inc (NASDAQ:HCAT), and Domtar Corporation (NYSE:UFS). This group of stocks' market values are closest to UCBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WABC,12,23440,0 NVMI,11,212026,-2 MSTR,20,87203,-6 LZB,20,67843,-1 ONTO,15,114223,-2 HCAT,14,130755,1 UFS,24,218760,-3 Average,16.6,122036,-1.9 [/table]
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $39 million in UCBI's case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is the least popular one with only 11 bullish hedge fund positions. United Community Banks Inc (NASDAQ:UCBI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UCBI is 29.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on UCBI as the stock returned 56.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
