In this article we will check out the progression of hedge fund sentiment towards UFP Industries, Inc. (NASDAQ:UFPI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is UFPI a good stock to buy? UFP Industries, Inc. (NASDAQ:UFPI) was in 16 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 27. UFPI has experienced a decrease in hedge fund interest recently. There were 19 hedge funds in our database with UFPI positions at the end of the fourth quarter. Our calculations also showed that UFPI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think UFPI Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in UFPI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in UFP Industries, Inc. (NASDAQ:UFPI), which was worth $71.5 million at the end of the fourth quarter. On the second spot was SG Capital Management which amassed $30.2 million worth of shares. Arrowstreet Capital, Fisher Asset Management, and Adage Capital 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 SG Capital Management allocated the biggest weight to UFP Industries, Inc. (NASDAQ:UFPI), around 8.87% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, dishing out 7.92 percent of its 13F equity portfolio to UFPI.
Since UFP Industries, Inc. (NASDAQ:UFPI) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few funds who sold off their full holdings in the first quarter. Intriguingly, Renaissance Technologies said goodbye to the largest stake of the 750 funds watched by Insider Monkey, worth about $6.4 million in stock. Mark Coe's fund, Intrinsic Edge Capital, also dropped its stock, about $2.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as UFP Industries, Inc. (NASDAQ:UFPI) but similarly valued. We will take a look at Perspecta Inc. (NYSE:PRSP), Hamilton Lane Incorporated (NASDAQ:HLNE), FireEye Inc (NASDAQ:FEYE), Altair Engineering Inc. (NASDAQ:ALTR), New Residential Investment Corp (NYSE:NRZ), Novanta Inc. (NASDAQ:NOVT), and SailPoint Technologies Holdings, Inc. (NYSE:SAIL). This group of stocks' market caps are similar to UFPI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRSP,40,957808,3 HLNE,16,78897,2 FEYE,25,181632,-6 ALTR,18,581401,2 NRZ,15,84760,-7 NOVT,16,94857,-2 SAIL,29,888355,-3 Average,22.7,409673,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $410 million. That figure was $172 million in UFPI's case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand New Residential Investment Corp (NYSE:NRZ) is the least popular one with only 15 bullish hedge fund positions. UFP Industries, Inc. (NASDAQ:UFPI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UFPI is 21.8. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately UFPI wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UFPI investors were disappointed as the stock returned -3.9% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.