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Did Hedge Funds Drop The Ball On Knight-Swift Transportation Holdings Inc. (KNX) ?

Is Knight-Swift Transportation Holdings Inc. (NYSE:KNX) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Knight-Swift Transportation Holdings Inc. (NYSE:KNX) was in 23 hedge funds’ portfolios at the end of the second quarter of 2019. KNX shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 33 hedge funds in our database with KNX positions at the end of the previous quarter. Our calculations also showed that KNX isn’t among the 30 most popular stocks among hedge funds.

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.

Jonathan Barrett Luminus Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 go over the recent hedge fund action encompassing Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

How have hedgies been trading Knight-Swift Transportation Holdings Inc. (NYSE:KNX)?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in KNX over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with KNX Positions

More specifically, Impala Asset Management was the largest shareholder of Knight-Swift Transportation Holdings Inc. (NYSE:KNX), with a stake worth $100.1 million reported as of the end of March. Trailing Impala Asset Management was Luminus Management, which amassed a stake valued at $44.8 million. Millennium Management, 12th Street Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has witnessed declining sentiment from the smart money, it’s easy to see that there was a specific group of funds that slashed their full holdings last quarter. At the top of the heap, Peter S. Park’s Park West Asset Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $17.2 million in stock. Philip Hempleman’s fund, Ardsley Partners, also dumped its stock, about $8.3 million worth. These moves are interesting, as total hedge fund interest was cut by 10 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Knight-Swift Transportation Holdings Inc. (NYSE:KNX) but similarly valued. We will take a look at Jefferies Financial Group Inc. (NYSE:JEF), HUYA Inc. (NYSE:HUYA), Medidata Solutions Inc (NASDAQ:MDSO), and Versum Materials, Inc. (NYSE:VSM). This group of stocks’ market valuations resemble KNX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JEF 34 677810 -1
HUYA 22 237304 1
MDSO 30 534002 14
VSM 36 913067 -7
Average 30.5 590546 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $263 million in KNX’s case. Versum Materials, Inc. (NYSE:VSM) is the most popular stock in this table. On the other hand HUYA Inc. (NYSE:HUYA) is the least popular one with only 22 bullish hedge fund positions. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) 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 (view the video below) 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 KNX as the stock returned 10.7% during the same time frame and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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