Is CVLG A Good Stock To Buy Now?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Covenant Logistics Group, Inc. (NASDAQ:CVLG).

Is Covenant Logistics Group, Inc. (NASDAQ:CVLG) ready to rally soon? Prominent investors were turning bullish. The number of long hedge fund positions advanced by 1 in recent months. Covenant Logistics Group, Inc. (NASDAQ:CVLG) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 19. Our calculations also showed that CVLG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Covenant Logistics Group, Inc. (NASDAQ:CVLG).

Do Hedge Funds Think CVLG Is A Good Stock To Buy Now?

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CVLG over the last 21 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Scopus Asset Management, managed by Alexander Mitchell, holds the largest position in Covenant Logistics Group, Inc. (NASDAQ:CVLG). Scopus Asset Management has a $8.2 million position in the stock, comprising 0.2% of its 13F portfolio. On Scopus Asset Management’s heels is Millennium Management, managed by Israel Englander, which holds a $4.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Covenant Logistics Group, Inc. (NASDAQ:CVLG), around 0.42% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to CVLG.

As aggregate interest increased, key money managers were leading the bulls’ herd. Forest Hill Capital, managed by Mark Lee, initiated the biggest position in Covenant Logistics Group, Inc. (NASDAQ:CVLG). Forest Hill Capital had $0.9 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) also made a $0 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Covenant Logistics Group, Inc. (NASDAQ:CVLG) but similarly valued. These stocks are Vitru Limited (NASDAQ:VTRU), Metalla Royalty & Streaming Ltd. (NYSE:MTA), Global Indemnity Group LLC (NASDAQ:GBLI), Titan Machinery Inc. (NASDAQ:TITN), Pulse Biosciences, Inc (NASDAQ:PLSE), Flushing Financial Corporation (NASDAQ:FFIC), and Motorcar Parts of America, Inc. (NASDAQ:MPAA). All of these stocks’ market caps match CVLG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VTRU 9 11476 9
MTA 3 2860 -1
GBLI 7 11899 3
TITN 14 17341 5
PLSE 2 449 0
FFIC 10 26432 -1
MPAA 8 53762 0
Average 7.6 17746 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $25 million in CVLG’s case. Titan Machinery Inc. (NASDAQ:TITN) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 2 bullish hedge fund positions. Covenant Logistics Group, Inc. (NASDAQ:CVLG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVLG is 60.9. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately CVLG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CVLG were disappointed as the stock returned -0.2% since the end of September (through 12/8) 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.

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