The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards United Therapeutics Corporation (NASDAQ:UTHR).
Is UTHR a good stock to buy now? Prominent investors were becoming less hopeful. The number of long hedge fund positions decreased by 10 recently. United Therapeutics Corporation (NASDAQ:UTHR) was in 31 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. Our calculations also showed that UTHR 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 the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
William Leland Edwards of Palo Alto Investors
William Leland Edwards of Palo Alto Investors
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 we're going to check out the recent hedge fund action regarding United Therapeutics Corporation (NASDAQ:UTHR).
Do Hedge Funds Think UTHR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards UTHR over the last 21 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in United Therapeutics Corporation (NASDAQ:UTHR), which was worth $374.6 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $118.7 million worth of shares. AQR Capital Management, Palo Alto Investors, and D E Shaw 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 Great Point Partners allocated the biggest weight to United Therapeutics Corporation (NASDAQ:UTHR), around 5.82% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 5.47 percent of its 13F equity portfolio to UTHR.
Seeing as United Therapeutics Corporation (NASDAQ:UTHR) has faced bearish sentiment from the smart money, it's easy to see that there was a specific group of fund managers who were dropping their full holdings heading into Q4. Intriguingly, Farallon Capital cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $42.4 million in stock, and George McCabe's Portolan Capital Management was right behind this move, as the fund cut about $9.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 10 funds heading into Q4.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. We will take a look at Continental Resources, Inc. (NYSE:CLR), Old Republic International Corporation (NYSE:ORI), Nutanix, Inc. (NASDAQ:NTNX), Under Armour Inc (NYSE:UA), Primerica, Inc. (NYSE:PRI), ICL Group Ltd. (NYSE:ICL), and Asana Inc. (NYSE:ASAN). This group of stocks' market valuations are similar to UTHR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLR,25,101739,2 ORI,31,263457,5 NTNX,24,535548,4 UA,48,846715,8 PRI,35,436663,10 ICL,5,18886,0 ASAN,17,219416,17 Average,26.4,346061,6.6 [/table]
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $1077 million in UTHR's case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UTHR is 47.9. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on UTHR as the stock returned 45.4% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow United Therapeutics Corp (NASDAQ:UTHR)
Disclosure: None. This article was originally published at Insider Monkey.
