Did Hedge Funds Drop The Ball On Heartland Express, Inc. (HTLD) ?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Heartland Express, Inc. (NASDAQ:HTLD).

Heartland Express, Inc. (NASDAQ:HTLD) investors should be aware of a decrease in support from the world’s most elite money managers lately. Our calculations also showed that HTLD isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the new hedge fund action encompassing Heartland Express, Inc. (NASDAQ:HTLD).

How are hedge funds trading Heartland Express, Inc. (NASDAQ:HTLD)?

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HTLD over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

No of Hedge Funds with HTLD Positions

Among these funds, Renaissance Technologies held the most valuable stake in Heartland Express, Inc. (NASDAQ:HTLD), which was worth $9.7 million at the end of the second quarter. On the second spot was Marshall Wace LLP which amassed $3.7 million worth of shares. Moreover, D E Shaw, Citadel Investment Group, and Two Sigma Advisors were also bullish on Heartland Express, Inc. (NASDAQ:HTLD), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Heartland Express, Inc. (NASDAQ:HTLD) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that elected to cut their positions entirely last quarter. It’s worth mentioning that Lee Ainslie’s Maverick Capital dropped the biggest stake of the 750 funds watched by Insider Monkey, comprising about $6.7 million in stock, and Jonathan Barrett and Paul Segal’s Luminus Management was right behind this move, as the fund sold off about $3.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Heartland Express, Inc. (NASDAQ:HTLD). We will take a look at Actuant Corporation (NYSE:ATU), AnaptysBio, Inc. (NASDAQ:ANAB), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Opko Health Inc. (NASDAQ:OPK). This group of stocks’ market caps match HTLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATU 12 287386 3
ANAB 16 547980 -4
CCO 32 453766 21
OPK 14 13007 1
Average 18.5 325535 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $30 million in HTLD’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Actuant Corporation (NYSE:ATU) is the least popular one with only 12 bullish hedge fund positions. Heartland Express, Inc. (NASDAQ:HTLD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on HTLD as the stock returned 19.1% during the same time frame and outperformed the market by an even larger margin.

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