Is YRCW A Good Stock To Buy Now?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding YRC Worldwide, Inc. (NASDAQ:YRCW).

YIs YRCW a good stock to buy now? RC Worldwide, Inc. (NASDAQ:YRCW) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 27. YRCW has seen a decrease in support from the world’s most elite money managers lately. There were 10 hedge funds in our database with YRCW holdings at the end of June. Our calculations also showed that YRCW 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.

Ron Gutfleish Elm Ridge Capital

Ron Gutfleish of Elm Ridge Capital

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. Now let’s take a glance at the key hedge fund action regarding YRC Worldwide, Inc. (NASDAQ:YRCW).

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

At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards YRCW over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the biggest position in YRC Worldwide, Inc. (NASDAQ:YRCW). Millennium Management has a $2.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Millennium Management’s heels is D E Shaw, led by D. E. Shaw, holding a $2.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ron Gutfleish’s Elm Ridge Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to YRC Worldwide, Inc. (NASDAQ:YRCW), around 2.01% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.0033 percent of its 13F equity portfolio to YRCW.

Because YRC Worldwide, Inc. (NASDAQ:YRCW) has faced a decline in interest from hedge fund managers, we can see that there is a sect of funds that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Renaissance Technologies cut the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $1.1 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as YRC Worldwide, Inc. (NASDAQ:YRCW) but similarly valued. These stocks are Genie Energy Ltd (NYSE:GNE), Dyadic International, Inc. (NASDAQ:DYAI), CTO Realty Growth Inc (NYSE:CTO), Concrete Pumping Holdings, Inc. (NASDAQ:BBCP), XOMA Corp (NASDAQ:XOMA), Arcimoto, Inc. (NASDAQ:FUV), and Bioceres Crop Solutions Corp. (NYSE:BIOX). This group of stocks’ market valuations are closest to YRCW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNE 8 11912 -2
DYAI 4 5392 1
CTO 8 17012 -4
BBCP 7 33602 0
XOMA 9 93108 -3
FUV 1 827 0
BIOX 2 323 -1
Average 5.6 23168 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $8 million in YRCW’s case. XOMA Corp (NASDAQ:XOMA) is the most popular stock in this table. On the other hand Arcimoto, Inc. (NASDAQ:FUV) is the least popular one with only 1 bullish hedge fund positions. YRC Worldwide, Inc. (NASDAQ:YRCW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for YRCW is 64. 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. 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 still beat the market by 16.2 percentage points. Hedge funds were also right about betting on YRCW as the stock returned 59.2% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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