Is USA Truck, Inc. (USAK) Going to Burn These Hedge Funds?

The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards USA Truck, Inc. (NASDAQ:USAK), and what that likely means for the prospects of the company and its stock.

Is USA Truck, Inc. (NASDAQ:USAK) a buy here? Money managers are in a bearish mood. The number of bullish hedge fund bets shrunk by 4 recently. Our calculations also showed that usak isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We’re going to take a look at the recent hedge fund action regarding USA Truck, Inc. (NASDAQ:USAK).

What have hedge funds been doing with USA Truck, Inc. (NASDAQ:USAK)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards USAK over the last 13 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with USAK Positions

Among these funds, Renaissance Technologies held the most valuable stake in USA Truck, Inc. (NASDAQ:USAK), which was worth $5.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $3.7 million worth of shares. Moreover, Arrowstreet Capital, GLG Partners, and Two Sigma Advisors were also bullish on USA Truck, Inc. (NASDAQ:USAK), allocating a large percentage of their portfolios to this stock.

Seeing as USA Truck, Inc. (NASDAQ:USAK) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $8.7 million in stock. George McCabe’s fund, Portolan Capital Management, also dumped its stock, about $4.2 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as USA Truck, Inc. (NASDAQ:USAK) but similarly valued. We will take a look at ContraFect Corp (NASDAQ:CFRX), Franklin Universal Trust (NYSE:FT), Mediwound Ltd (NASDAQ:MDWD), and Nature’s Sunshine Products, Inc. (NASDAQ:NATR). This group of stocks’ market values are closest to USAK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CFRX 10 42304 0
FT 2 324 0
MDWD 3 2483 -2
NATR 6 68029 0
Average 5.25 28285 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $20 million in USAK’s case. ContraFect Corp (NASDAQ:CFRX) is the most popular stock in this table. On the other hand Franklin Universal Trust (NYSE:FT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks USA Truck, Inc. (NASDAQ:USAK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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