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How do Hedge Funds View Knight-Swift Transportation Holdings Inc. (NYSE:KNX) A Year After Blockbuster M&A Deal?

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Knight-Swift Transportation Holdings Inc. (NYSE:KNX) and see how the stock is affected by the recent hedge fund activity.

Knight-Swift Transportation Holdings Inc. (NYSE:KNX) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. KNX was in 31 hedge funds’ portfolios at the end of the third quarter of 2018. There were 37 hedge funds in our database with KNX holdings at the end of the previous quarter, still not enough to be counted as among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Knight Transportation and fellow Swift Transportation merged in an all-stock deal that gives the combined company an enterprise value of $6 billion in 2017. The move was a blockbuster M&A deal in the trucking industry, creating the largest trucking company in the United States.

Let’s analyze the latest hedge fund action regarding Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

How have hedgies been trading Knight-Swift Transportation Holdings Inc. (NYSE:KNX)?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in KNX at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

KNX_dec2018

More specifically, Citadel Investment Group was the largest shareholder of Knight-Swift Transportation Holdings Inc. (NYSE:KNX), with a stake worth $138.9 million reported as of the end of September. Trailing Citadel Investment Group was Impala Asset Management, which amassed a stake valued at $46.5 million. Anchor Bolt Capital, 12th Street Asset Management, and Masters Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management cut the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $81.7 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dropped about $81.1 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Knight-Swift Transportation Holdings Inc. (NYSE:KNX). These stocks are Pure Storage, Inc. (NYSE:PSTG), BlackBerry Limited (NYSE:BB), Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC), and Galapagos NV (NASDAQ:GLPG). This group of stocks’ market values resemble KNX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSTG 31 666311 4
BB 18 932206 -4
PAC 5 82276 2
GLPG 16 200584 2

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $470 million. That figure was $412 million in KNX’s case. Pure Storage, Inc. (NYSE:PSTG) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) is the least popular one with only 5 bullish hedge fund positions. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) 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. In this regard PSTG might be a better candidate to consider a long position.

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

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