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Hedge Funds Dropped The Ball On Saia Inc (SAIA)

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 Saia Inc (NASDAQ:SAIA) and determine whether hedge funds skillfully traded this stock.

Saia Inc (NASDAQ:SAIA) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. SAIA investors should be aware of a decrease in enthusiasm from smart money of late. There were 17 hedge funds in our database with SAIA holdings at the end of the previous quarter. Our calculations also showed that SAIA 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the top 20 agriculture producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the latest hedge fund action regarding Saia Inc (NASDAQ:SAIA).

How have hedgies been trading Saia Inc (NASDAQ:SAIA)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SAIA over the last 18 quarters. So, let’s check out 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, Jonathan Barrett and Paul Segal’s Luminus Management has the most valuable position in Saia Inc (NASDAQ:SAIA), worth close to $18.1 million, corresponding to 1.9% of its total 13F portfolio. The second most bullish fund manager is Anand Parekh of Alyeska Investment Group, with a $18 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Chuck Royce’s Royce & Associates, Ira Unschuld’s Brant Point Investment Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Saia Inc (NASDAQ:SAIA), around 1.87% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, earmarking 0.53 percent of its 13F equity portfolio to SAIA.

Seeing as Saia Inc (NASDAQ:SAIA) has witnessed declining sentiment from hedge fund managers, logic holds that there was a specific group of funds who were dropping their positions entirely by the end of the first quarter. Intriguingly, Richard Driehaus’s Driehaus Capital cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $14.2 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund sold off about $2.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Saia Inc (NASDAQ:SAIA). These stocks are Arcosa, Inc. (NYSE:ACA), Copa Holdings, S.A. (NYSE:CPA), RH (NYSE:RH), and Liberty Latin America Ltd. (NASDAQ:LILA). All of these stocks’ market caps are similar to SAIA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACA 17 184066 -3
CPA 15 138965 -7
RH 30 549200 -8
LILA 12 98864 1
Average 18.5 242774 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $63 million in SAIA’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILA) is the least popular one with only 12 bullish hedge fund positions. Saia Inc (NASDAQ:SAIA) is not the least popular stock in this group but hedge fund interest is still below 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on SAIA as the stock returned 46% during the second quarter and outperformed the market by an even larger margin.

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