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Do Hedge Funds Love Knight-Swift Transportation Holdings Inc. (KNX)?

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has experienced an increase in hedge fund interest of late. Our calculations also showed that KNX 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

SAC CAPITAL ADVISORS

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the recent hedge fund action encompassing Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

What have hedge funds been doing with Knight-Swift Transportation Holdings Inc. (NYSE:KNX)?

At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in KNX a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Knight-Swift Transportation Holdings Inc. (NYSE:KNX), with a stake worth $120.6 million reported as of the end of September. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $49.6 million. Alyeska Investment Group, Impala Asset Management, and Interval Partners 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 Impala Asset Management allocated the biggest weight to Knight-Swift Transportation Holdings Inc. (NYSE:KNX), around 4.39% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, dishing out 3.12 percent of its 13F equity portfolio to KNX.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Scopus Asset Management, managed by Alexander Mitchell, created the most outsized position in Knight-Swift Transportation Holdings Inc. (NYSE:KNX). Scopus Asset Management had $16.2 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also made a $9 million investment in the stock during the quarter. The other funds with brand new KNX positions are Steve Cohen’s Point72 Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Dmitry Balyasny’s Balyasny Asset Management.

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 Gentex Corporation (NASDAQ:GNTX), UGI Corp (NYSE:UGI), Genpact Limited (NYSE:G), and National Retail Properties, Inc. (NYSE:NNN). All of these stocks’ market caps are similar to KNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNTX 37 478532 5
UGI 27 253339 4
G 34 335413 -3
NNN 19 62007 -4
Average 29.25 282323 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $353 million in KNX’s case. Gentex Corporation (NASDAQ:GNTX) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 19 bullish hedge fund positions. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on KNX as the stock returned 26.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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