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Is Hub Group Inc (HUBG) A Good Stock To Buy ?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Hub Group Inc (NASDAQ:HUBG).

Is Hub Group Inc (NASDAQ:HUBG) a great investment now? Hedge funds are buying. The number of long hedge fund bets rose by 3 lately. Our calculations also showed that HUBG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). HUBG was in 21 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with HUBG 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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill 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. We’re going to analyze the new hedge fund action surrounding Hub Group Inc (NASDAQ:HUBG).

What does smart money think about Hub Group Inc (NASDAQ:HUBG)?

Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HUBG over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Diamond Hill Capital was the largest shareholder of Hub Group Inc (NASDAQ:HUBG), with a stake worth $139.8 million reported as of the end of September. Trailing Diamond Hill Capital was Fisher Asset Management, which amassed a stake valued at $59.9 million. Citadel Investment Group, D E Shaw, and Millennium 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 ACK Asset Management allocated the biggest weight to Hub Group Inc (NASDAQ:HUBG), around 1.45% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to HUBG.

As one would reasonably expect, key money managers were leading the bulls’ herd. ACK Asset Management, managed by Richard S. Meisenberg, established the biggest position in Hub Group Inc (NASDAQ:HUBG). ACK Asset Management had $5.2 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Hoon Kim’s Quantinno Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s check out hedge fund activity in other stocks similar to Hub Group Inc (NASDAQ:HUBG). These stocks are Alder Biopharmaceuticals Inc (NASDAQ:ALDR), Insmed Incorporated (NASDAQ:INSM), La-Z-Boy Incorporated (NYSE:LZB), and Park National Corporation (NYSE:PRK). All of these stocks’ market caps are closest to HUBG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALDR 29 829615 14
INSM 22 372563 -1
LZB 23 92601 2
PRK 8 15270 0
Average 20.5 327512 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $256 million in HUBG’s case. Alder Biopharmaceuticals Inc (NASDAQ:ALDR) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 8 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 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. Hedge funds were also right about betting on HUBG, though not to the same extent, as the stock returned 9.8% during the first two months of the fourth quarter and outperformed the market as well.

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

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