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Is Knight Transportation (KNX) Going to Burn These Hedge Funds?

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Knight Transportation (NYSE:KNX) was in 17 hedge funds’ portfolio at the end of March. KNX has seen an increase in activity from the world’s largest hedge funds of late. There were 12 hedge funds in our database with KNX holdings at the end of the previous quarter.

Millennium Management, Catapult Capital Management

According to most market participants, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, we choose to focus on the bigwigs of this group, around 450 funds. It is widely believed that this group oversees the lion’s share of the smart money’s total capital, and by paying attention to their best stock picks, we have deciphered a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as key, positive insider trading activity is a second way to break down the world of equities. Obviously, there are a number of motivations for a bullish insider to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).

Consequently, we’re going to take a gander at the latest action encompassing Knight Transportation (NYSE:KNX).

What have hedge funds been doing with Knight Transportation (NYSE:KNX)?

In preparation for this quarter, a total of 17 of the hedge funds we track were long in this stock, a change of 42% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially.

Of the funds we track, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the largest position in Knight Transportation (NYSE:KNX). First Pacific Advisors LLC has a $25 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $7.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include John Fichthorn’s Dialectic Capital Management, David Keidan’s Buckingham Capital Management and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, initiated the biggest position in Knight Transportation (NYSE:KNX). First Pacific Advisors LLC had 25 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $2.1 million position during the quarter. The other funds with brand new KNX positions are Ken Griffin’s Citadel Investment Group, Joel Greenblatt’s Gotham Asset Management, and Ken Brodkowitz and Mike Vermut’s Newland Capital.

How have insiders been trading Knight Transportation (NYSE:KNX)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time period, Knight Transportation (NYSE:KNX) has experienced zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Knight Transportation (NYSE:KNX). These stocks are Universal Truckload Services, Inc. (NASDAQ:UACL), Swift Transportation Co (NYSE:SWFT), Con-way Inc (NYSE:CNW), Werner Enterprises, Inc. (NASDAQ:WERN), and Heartland Express, Inc. (NASDAQ:HTLD). All of these stocks are in the trucking industry and their market caps match KNX’s market cap.

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