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Did Hedge Funds Make The Right Call On Hub Group Inc (HUBG) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Hub Group Inc (NASDAQ:HUBG) and determine whether the smart money was really smart about this stock.

Hub Group Inc (NASDAQ:HUBG) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. HUBG has seen a decrease in hedge fund sentiment in recent months. There were 19 hedge funds in our database with HUBG holdings at the end of the previous quarter. Our calculations also showed that HUBG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to go over the recent hedge fund action encompassing Hub Group Inc (NASDAQ:HUBG).

Hedge fund activity in Hub Group Inc (NASDAQ:HUBG)

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HUBG over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is HUBG A Good Stock To Buy?

Among these funds, Diamond Hill Capital held the most valuable stake in Hub Group Inc (NASDAQ:HUBG), which was worth $106.7 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $50.3 million worth of shares. Arrowstreet Capital, Royce & Associates, and Citadel Investment Group 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 Diamond Hill Capital allocated the biggest weight to Hub Group Inc (NASDAQ:HUBG), around 0.72% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.29 percent of its 13F equity portfolio to HUBG.

Because Hub Group Inc (NASDAQ:HUBG) has faced bearish sentiment from the smart money, it’s easy to see that there exists a select few hedgies who sold off their full holdings last quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management sold off the biggest position of all the hedgies tracked by Insider Monkey, totaling about $42.1 million in stock. Richard SchimeláandáLawrence Sapanski’s fund, Cinctive Capital Management, also sold off its stock, about $5.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Hub Group Inc (NASDAQ:HUBG). We will take a look at Arvinas, Inc. (NASDAQ:ARVN), NIC Inc. (NASDAQ:EGOV), 21Vianet Group Inc (NASDAQ:VNET), and KAR Auction Services Inc (NYSE:KAR). This group of stocks’ market caps are similar to HUBG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARVN 25 431346 -1
EGOV 17 105397 -5
VNET 15 129811 -1
KAR 21 203698 -5
Average 19.5 217563 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $191 million in HUBG’s case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand 21Vianet Group Inc (NASDAQ:VNET) is the least popular one with only 15 bullish hedge fund positions. Hub Group Inc (NASDAQ:HUBG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately HUBG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HUBG investors were disappointed as the stock returned 13.3% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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