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Hedge Funds Never Been This Bullish On Werner Enterprises, Inc. (WERN)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Werner Enterprises, Inc. (NASDAQ:WERN) and determine whether hedge funds had an edge regarding this stock.

Is Werner Enterprises, Inc. (NASDAQ:WERN) the right investment to pursue these days? Hedge funds were getting more optimistic. The number of long hedge fund bets rose by 15 recently. Werner Enterprises, Inc. (NASDAQ:WERN) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WERN 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). There were 17 hedge funds in our database with WERN positions at the end of the first quarter.

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s check out the latest hedge fund action encompassing Werner Enterprises, Inc. (NASDAQ:WERN).

How have hedgies been trading Werner Enterprises, Inc. (NASDAQ:WERN)?

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 88% from the first quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in WERN a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Werner Enterprises, Inc. (NASDAQ:WERN), which was worth $60.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $60.5 million worth of shares. Millennium Management, Zimmer Partners, and Scopus Asset 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 12th Street Asset Management allocated the biggest weight to Werner Enterprises, Inc. (NASDAQ:WERN), around 1.91% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 1.86 percent of its 13F equity portfolio to WERN.

Now, some big names were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the most outsized position in Werner Enterprises, Inc. (NASDAQ:WERN). Zimmer Partners had $42.4 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $24.1 million investment in the stock during the quarter. The other funds with brand new WERN positions are Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Thyra Zerhusen’s Fairpointe Capital, and Noam Gottesman’s GLG Partners.

Let’s now review hedge fund activity in other stocks similar to Werner Enterprises, Inc. (NASDAQ:WERN). These stocks are KB Home (NYSE:KBH), Bandwidth Inc. (NASDAQ:BAND), Inovalon Holdings Inc (NASDAQ:INOV), Lazard Ltd (NYSE:LAZ), Proto Labs Inc (NYSE:PRLB), Granite Real Estate Investment Trust (NYSE:GRP), and Companhia Energetica de Minas Gerais (NYSE:CIG). This group of stocks’ market caps are closest to WERN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KBH 23 334345 -2
BAND 30 293956 -3
INOV 13 77487 -2
LAZ 18 522215 3
PRLB 17 25450 4
GRP 6 17893 2
CIG 9 27400 -1
Average 16.6 185535 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $389 million in WERN’s case. Bandwidth Inc. (NASDAQ:BAND) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Werner Enterprises, Inc. (NASDAQ:WERN) is more popular among hedge funds. Our overall hedge fund sentiment score for WERN is 90. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 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 -0.1% since the end of the second quarter 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 most of these stocks already outperformed the market in 2020.

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