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Did Hedge Funds Make The Right Call On Werner Enterprises, Inc. (WERN)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Werner Enterprises, Inc. (NASDAQ:WERN) and determine whether hedge funds skillfully traded this stock.

Is Werner Enterprises, Inc. (NASDAQ:WERN) an exceptional investment today? The smart money was taking a pessimistic view. The number of bullish hedge fund positions decreased by 4 in recent months. Our calculations also showed that WERN 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). WERN was in 17 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with WERN positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most traders, hedge funds are perceived as unimportant, outdated investment tools of yesteryear. While there are greater than 8000 funds trading today, We hone in on the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people shepherd the majority of all hedge funds’ total asset base, and by keeping an eye on their best stock picks, Insider Monkey has brought to light numerous investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 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 review the latest hedge fund action encompassing Werner Enterprises, Inc. (NASDAQ:WERN).

What have hedge funds been doing with Werner Enterprises, Inc. (NASDAQ:WERN)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in WERN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WERN A Good Stock To Buy?

More specifically, AQR Capital Management was the largest shareholder of Werner Enterprises, Inc. (NASDAQ:WERN), with a stake worth $42.2 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $39.8 million. Luminus Management, D E Shaw, and Royce & Associates 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 Luminus Management allocated the biggest weight to Werner Enterprises, Inc. (NASDAQ:WERN), around 2.6% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, dishing out 0.76 percent of its 13F equity portfolio to WERN.

Because Werner Enterprises, Inc. (NASDAQ:WERN) has experienced declining sentiment from the smart money, logic holds that there exists a select few money managers that decided to sell off their positions entirely heading into Q4. At the top of the heap, Michael Cowley’s Sandbar Asset Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $5.5 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $3.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Werner Enterprises, Inc. (NASDAQ:WERN). We will take a look at Cenovus Energy Inc (NYSE:CVE), Companhia Energetica Minas Gerais (NYSE:CIG), Corporate Office Properties Trust (NYSE:OFC), and Manchester United PLC (NYSE:MANU). This group of stocks’ market caps are similar to WERN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVE 24 102988 -7
CIG 10 20207 1
OFC 17 158054 -4
MANU 8 27822 -2
Average 14.75 77268 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $162 million in WERN’s case. Cenovus Energy Inc (NYSE:CVE) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 8 bullish hedge fund positions. Werner Enterprises, Inc. (NASDAQ:WERN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 but beat the market by 17.1 percentage points. Unfortunately WERN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WERN were disappointed as the stock returned 21.4% during the same time period 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 many of these stocks already outperformed the market so far this year.

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