Hedge Funds Are Dipping Their Toes Into Rush Enterprises, Inc. (RUSHA)

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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Rush Enterprises, Inc. (NASDAQ:RUSHA) and determine whether the smart money was really smart about this stock.

Rush Enterprises, Inc. (NASDAQ:RUSHA) shareholders have witnessed an increase in hedge fund interest recently. Rush Enterprises, Inc. (NASDAQ:RUSHA) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. There were 17 hedge funds in our database with RUSHA positions at the end of the first quarter. Our calculations also showed that RUSHA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a gander at the fresh hedge fund action encompassing Rush Enterprises, Inc. (NASDAQ:RUSHA).

What does smart money think about Rush Enterprises, Inc. (NASDAQ:RUSHA)?

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in RUSHA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the biggest position in Rush Enterprises, Inc. (NASDAQ:RUSHA). Renaissance Technologies has a $21.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Mark Lee’s Mountaineer Partners Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to Rush Enterprises, Inc. (NASDAQ:RUSHA), around 7.25% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, earmarking 0.91 percent of its 13F equity portfolio to RUSHA.

As aggregate interest increased, some big names have been driving this bullishness. Mountaineer Partners Management, managed by Mark Lee, assembled the most valuable position in Rush Enterprises, Inc. (NASDAQ:RUSHA). Mountaineer Partners Management had $5.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHA) but similarly valued. These stocks are Cerence Inc. (NASDAQ:CRNC), Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), Urban Outfitters, Inc. (NASDAQ:URBN), Comfort Systems USA, Inc. (NYSE:FIX), Mueller Water Products, Inc. (NYSE:MWA), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), and Zuora, Inc. (NYSE:ZUO). This group of stocks’ market values resemble RUSHA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRNC 14 148123 3
KNSA 18 294081 8
URBN 20 54759 -3
FIX 22 80323 2
MWA 21 197650 1
SBGI 24 258240 -1
ZUO 21 104127 -2
Average 20 162472 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $60 million in RUSHA’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Cerence Inc. (NASDAQ:CRNC) is the least popular one with only 14 bullish hedge fund positions. Rush Enterprises, Inc. (NASDAQ:RUSHA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RUSHA is 48.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on RUSHA as the stock returned 22.3% in the third quarter and outperformed the market by an even larger margin.

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