Knight-Swift Transportation Holdings Inc. (KNX): Hedge Funds Are Snapping Up

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 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 Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

Is Knight-Swift Transportation Holdings Inc. (NYSE:KNX) undervalued? The best stock pickers were taking an optimistic view. The number of long hedge fund positions went up by 1 lately. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 52. Our calculations also showed that KNX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Knight-Swift Transportation Holdings Inc. (NYSE:KNX).

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

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KNX over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Knight-Swift Transportation Holdings Inc. (NYSE:KNX), which was worth $96.4 million at the end of the second quarter. On the second spot was D E Shaw which amassed $66.5 million worth of shares. 12th Street Asset Management, Adage Capital Management, and Water Street Capital 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 12th Street Asset Management allocated the biggest weight to Knight-Swift Transportation Holdings Inc. (NYSE:KNX), around 4.23% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, designating 3.11 percent of its 13F equity portfolio to KNX.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the biggest position in Knight-Swift Transportation Holdings Inc. (NYSE:KNX). Adage Capital Management had $18.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $4.7 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Knight-Swift Transportation Holdings Inc. (NYSE:KNX) but similarly valued. We will take a look at SiteOne Landscape Supply, Inc. (NYSE:SITE), Starwood Property Trust, Inc. (NYSE:STWD), Alaska Air Group, Inc. (NYSE:ALK), FirstService Corporation (TSE:FSV), Royal Gold, Inc (NASDAQ:RGLD), Luminar Technologies, Inc. (NASDAQ:LAZR), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market valuations are similar to KNX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $368 million. That figure was $271 million in KNX’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 11 bullish hedge fund positions. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KNX is 43.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on KNX as the stock returned 9% since the end of Q2 (through 10/15) 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.

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