Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Marten Transport, Ltd (NASDAQ:MRTN).
Is Marten Transport, Ltd (NASDAQ:MRTN) ready to rally soon? Hedge funds are indeed taking a bearish view. The number of bullish hedge fund bets that are revealed through the 13F filings experienced a decline of 1 lately. MRTN was in 11 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with MRTN holdings at the end of the previous quarter. At the end of this article we will also compare MRTN to other stocks including Mistras Group, Inc. (NYSE:MG), CommerceHub Inc (NASDAQ:CHUBK), and TrustCo Bank Corp NY (NASDAQ:TRST) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
What does the smart money think about Marten Transport, Ltd (NASDAQ:MRTN)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRTN over the last 5 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, 12th Street Asset Management, led by Michael O’Keefe, holds the most valuable position in Marten Transport, Ltd (NASDAQ:MRTN). 12th Street Asset Management has a $7.3 million position in the stock, comprising 2.8% of its 13F portfolio. The second most bullish fund manager is MSDC Management, led by Marc Lisker, Glenn Fuhrman and John Phelan, holding a $6.3 million position. Remaining professional money managers with similar optimism encompass Chuck Royce’s Royce & Associates, Paul Hondros’ AlphaOne Capital Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that 12th Street Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $3.7 million in stock, and Ken Grossman and Glen Schneider’s SG Capital Management was right behind this move, as the fund sold off about $0.9 million worth of shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marten Transport, Ltd (NASDAQ:MRTN) but similarly valued. We will take a look at Mistras Group, Inc. (NYSE:MG), CommerceHub Inc (NASDAQ:CHUBK), TrustCo Bank Corp NY (NASDAQ:TRST), and Flushing Financial Corporation (NASDAQ:FFIC). This group of stocks’ market values resemble MRTN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $23 million in MRTN’s case. CommerceHub Inc (NASDAQ:CHUBK) is the most popular stock in this table. On the other hand Flushing Financial Corporation (NASDAQ:FFIC) is the least popular one with only 10 bullish hedge fund positions. Marten Transport, Ltd (NASDAQ:MRTN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CHUBK might be a better candidate to consider taking a long position in.