Hedge Funds Aren’t Crazy About Uber Technologies, Inc. (UBER) Anymore

·6 min read

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Uber Technologies, Inc. (NYSE:UBER).

Uber Technologies, Inc. (NYSE:UBER) has seen a decrease in enthusiasm from smart money in recent months. Uber Technologies, Inc. (NYSE:UBER) was in 130 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 135. There were 135 hedge funds in our database with UBER positions at the end of the fourth quarter. Our calculations also showed that UBER ranked 11th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gil Simon of SoMa Equity Partners
Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a look at the recent hedge fund action surrounding Uber Technologies, Inc. (NYSE:UBER).

Do Hedge Funds Think UBER Is A Good Stock To Buy Now?

At first quarter's end, a total of 130 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 97 hedge funds held shares or bullish call options in UBER a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Altimeter Capital Management was the largest shareholder of Uber Technologies, Inc. (NYSE:UBER), with a stake worth $1548.7 million reported as of the end of March. Trailing Altimeter Capital Management was Tiger Global Management LLC, which amassed a stake valued at $1135 million. Coatue Management, Point72 Asset Management, and SoMa Equity Partners 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 Tao Capital allocated the biggest weight to Uber Technologies, Inc. (NYSE:UBER), around 19.86% of its 13F portfolio. Marathon Partners is also relatively very bullish on the stock, earmarking 19.28 percent of its 13F equity portfolio to UBER.

Judging by the fact that Uber Technologies, Inc. (NYSE:UBER) has faced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of hedge funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Alex Sacerdote's Whale Rock Capital Management sold off the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $341.5 million in stock. Anand Desai's fund, Darsana Capital Partners, also dumped its stock, about $191.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds by the end of the first quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Uber Technologies, Inc. (NYSE:UBER) but similarly valued. We will take a look at Target Corporation (NYSE:TGT), Micron Technology, Inc. (NASDAQ:MU), CVS Health Corporation (NYSE:CVS), ServiceNow Inc (NYSE:NOW), Diageo plc (NYSE:DEO), Booking Holdings Inc. (NASDAQ:BKNG), and Advanced Micro Devices, Inc. (NASDAQ:AMD). This group of stocks' market valuations resemble UBER's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TGT,60,4760942,-18 MU,100,7621579,0 CVS,62,1315655,6 NOW,98,6127672,2 DEO,22,724467,-1 BKNG,103,6810305,-5 AMD,62,3703315,-12 Average,72.4,4437705,-4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 72.4 hedge funds with bullish positions and the average amount invested in these stocks was $4438 million. That figure was $10533 million in UBER's case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Uber Technologies, Inc. (NYSE:UBER) is more popular among hedge funds. Our overall hedge fund sentiment score for UBER is 93.9. 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 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately UBER wasn't nearly as popular as these 5 stocks and hedge funds that were betting on UBER were disappointed as the stock returned -8.3% since the end of the first quarter (through 6/11) 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 since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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