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Even among Wall Street’s best, there are varying opinions.
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SEC filings showed many top funds and billionaires buying the same stock in the second quarter.
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This stock has been crushed this year, but historically has been a strong performer over many decades.
While the market is full of varying perspectives from many different investors, the “smart money” is still held in high regard. By smart money, I mean professional investors, many of whom run their own funds, have decades of investment experience, and can show long-term returns to back it up.
Just like the market, the pros rarely agree on individual stocks. That’s why when you do see a group of elite hedge funds and billionaires piling into a stock, it could be a strong indicator.
UnitedHealth Group (NYSE: UNH) has seen its stock get crushed this year, for myriad reasons. But while it continued to sell off intensely in the second quarter of the year, some of Wall Street’s most prominent hedge funds and billionaires began piling into the name. They clearly think they have found an asymmetric opportunity, meaning they view the stock at a level where the potential upside far exceeds potential downside.
UnitedHealth got a big jolt recently after Warren Buffett’s Berkshire Hathaway disclosed that it held a position worth over $1.5 billion at the end of the second quarter. Buffett and his team are value investors at their core, seeking out undervalued stocks that can pay off over a longer time frame. But it wasn’t just Buffett who got in; a whole group of hedge fund investors bought shares as well.
Appaloosa Management, run by the billionaire investor David Tepper, increased its stake by 1,300%, from 175,000 shares in the first quarter to 2.45 million in the second quarter. The position is valued at over $764 million.
Scion Asset Management, run by Michael Burry, who was featured in the film The Big Short, bought $12 million of the stock in the second quarter, as well as 350,000 long call options. Call options are contracts that give the investor the right (but not the obligation) to purchase a stock at a specific price before or by a certain date. Each call option is worth 100 shares and if the market price of a stock exceeds what’s referred to as the strike price of a call option before or by a certain date, the investor will make money. Buying call options is a bet on a stock price rising and therefore a sign of optimism.
Lone Pine Capital, run by the billionaire Stephen Mandel Jr., purchased over 1.69 million shares.