Were Hedge Funds Right About Union Pacific Corporation (UNP)?
The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Union Pacific Corporation (NYSE:UNP).
Is Union Pacific Corporation (NYSE:UNP) a buy right now? Money managers were becoming less hopeful. The number of long hedge fund positions decreased by 6 in recent months. Union Pacific Corporation (NYSE:UNP) was in 68 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 74. Our calculations also showed that UNP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Aaron Cowen of Suvretta Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 let's take a look at the latest hedge fund action surrounding Union Pacific Corporation (NYSE:UNP).
Do Hedge Funds Think UNP Is A Good Stock To Buy Now?
At Q4's end, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in UNP over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Union Pacific Corporation (NYSE:UNP) was held by Fisher Asset Management, which reported holding $893.9 million worth of stock at the end of December. It was followed by Soroban Capital Partners with a $626.5 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Union Pacific Corporation (NYSE:UNP), around 8.36% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, designating 4.83 percent of its 13F equity portfolio to UNP.
Because Union Pacific Corporation (NYSE:UNP) has experienced a decline in interest from the smart money, logic holds that there was a specific group of fund managers who were dropping their positions entirely in the fourth quarter. At the top of the heap, John Armitage's Egerton Capital Limited dropped the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling close to $619.3 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dumped about $4.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds in the fourth quarter.
Let's now review hedge fund activity in other stocks similar to Union Pacific Corporation (NYSE:UNP). These stocks are Bristol Myers Squibb Company (NYSE:BMY), Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), Anheuser-Busch InBev SA/NV (NYSE:BUD), JD.Com Inc (NASDAQ:JD), Royal Dutch Shell plc (NYSE:RDS), and Amgen, Inc. (NASDAQ:AMGN). This group of stocks' market caps resemble UNP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMY,131,6088294,7 LIN,50,3950824,-10 SHOP,90,8723023,9 BUD,18,1294786,0 JD,89,14395875,4 RDS,34,1661345,3 AMGN,49,1039614,4 Average,65.9,5307680,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 65.9 hedge funds with bullish positions and the average amount invested in these stocks was $5308 million. That figure was $3539 million in UNP's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 bullish hedge fund positions. Union Pacific Corporation (NYSE:UNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNP is 48.7. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately UNP wasn't nearly as popular as these 30 stocks and hedge funds that were betting on UNP were disappointed as the stock returned 7.8% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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