Hedge Funds Have Never Been This Bullish On Marten Transport, Ltd (MRTN)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Marten Transport, Ltd (NASDAQ:MRTN).

Is Marten Transport, Ltd (NASDAQ:MRTN) the right pick for your portfolio? Investors who are in the know are taking a bullish view. The number of long hedge fund bets improved by 4 lately. Our calculations also showed that MRTN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MRTN was in 22 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with MRTN holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the new hedge fund action encompassing Marten Transport, Ltd (NASDAQ:MRTN).

What have hedge funds been doing with Marten Transport, Ltd (NASDAQ:MRTN)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in MRTN a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Millennium Management was the largest shareholder of Marten Transport, Ltd (NASDAQ:MRTN), with a stake worth $9.9 million reported as of the end of September. Trailing Millennium Management was 12th Street Asset Management, which amassed a stake valued at $8.5 million. Empirical Capital Partners, Arrowstreet Capital, and MSDC Management 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 Empirical Capital Partners allocated the biggest weight to Marten Transport, Ltd (NASDAQ:MRTN), around 11.35% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, designating 2.25 percent of its 13F equity portfolio to MRTN.

Now, some big names have been driving this bullishness. Empirical Capital Partners, managed by Cristan Blackman, created the largest position in Marten Transport, Ltd (NASDAQ:MRTN). Empirical Capital Partners had $8.3 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $0.6 million position during the quarter. The following funds were also among the new MRTN investors: Paul Tudor Jones’s Tudor Investment Corp, Nick Thakore’s Diametric Capital, and Donald Sussman’s Paloma Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Marten Transport, Ltd (NASDAQ:MRTN) but similarly valued. We will take a look at Cision Ltd. (NYSE:CISN), Avaya Holdings Corp. (NYSE:AVYA), Lakeland Financial Corporation (NASDAQ:LKFN), and Editas Medicine, Inc. (NASDAQ:EDIT). All of these stocks’ market caps are closest to MRTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CISN 24 84267 3
AVYA 40 259286 -2
LKFN 10 20174 -1
EDIT 11 100575 -3
Average 21.25 116076 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $61 million in MRTN’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 10 bullish hedge fund positions. Marten Transport, Ltd (NASDAQ:MRTN) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MRTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MRTN were disappointed as the stock returned 1.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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