Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Hub Group Inc (NASDAQ:HUBG).
Hedge fund interest in Hub Group Inc (NASDAQ:HUBG) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as AMC Entertainment Holdings Inc (NYSE:AMC), OneSmart International Education Group Limited (NYSE:ONE), and Rubius Therapeutics, Inc. (NASDAQ:RUBY) to gather more data points.
To most shareholders, hedge funds are viewed as worthless, outdated financial tools of years past. While there are over 8000 funds with their doors open at present, We choose to focus on the crème de la crème of this group, around 750 funds. These hedge fund managers shepherd the majority of the smart money’s total capital, and by observing their unrivaled investments, Insider Monkey has uncovered a number of investment strategies that have historically exceeded the market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to analyze the recent hedge fund action regarding Hub Group Inc (NASDAQ:HUBG).
Hedge fund activity in Hub Group Inc (NASDAQ:HUBG)
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HUBG over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Hub Group Inc (NASDAQ:HUBG), with a stake worth $120.5 million reported as of the end of December. Trailing Diamond Hill Capital was Fisher Asset Management, which amassed a stake valued at $52.9 million. Millennium Management, D E Shaw, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
Because Hub Group Inc (NASDAQ:HUBG) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of funds that decided to sell off their entire stakes heading into Q3. Interestingly, Brian Gustavson and Andrew Haley’s 1060 Capital Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $22.7 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also dropped its stock, about $14.8 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Hub Group Inc (NASDAQ:HUBG). We will take a look at AMC Entertainment Holdings Inc (NYSE:AMC), OneSmart International Education Group Limited (NYSE:ONE), Rubius Therapeutics, Inc. (NASDAQ:RUBY), and Global Net Lease, Inc. (NYSE:GNL). This group of stocks’ market valuations are closest to HUBG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMC | 21 | 89015 | 0 |
| ONE | 7 | 39567 | 2 |
| RUBY | 3 | 15917 | -4 |
| GNL | 7 | 34895 | 4 |
| Average | 9.5 | 44849 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $241 million in HUBG’s case. AMC Entertainment Holdings Inc (NYSE:AMC) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 3 bullish hedge fund positions. Hub Group Inc (NASDAQ:HUBG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on HUBG, though not to the same extent, as the stock returned 18.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
