Should You Buy Covenant Transportation Group, Inc. (CVTI)?

Many investors like Carl Icahn or Stan Druckenmiller have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Covenant Transportation Group, Inc. (NASDAQ:CVTI) changed recently.

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Is Covenant Transportation Group, Inc. (NASDAQ:CVTI) a healthy stock for your portfolio? Money managers are in an optimistic mood. The number of bullish hedge fund positions has moved up by seven lately. CVTI was in 19 hedge funds’ portfolio at the end of the third quarter of 2015. There were 12 hedge funds in our database with CVTI holdings at the end of the previous quarter.

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In the financial world, there are plenty of tools shareholders employ to grade stocks. A duo of the best tools are hedge fund and insider trading moves. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the top picks of the best hedge fund managers can beat their index-focused peers by a healthy margin (see the details here).

Now, let’s view the fresh action encompassing Covenant Transportation Group, Inc. (NASDAQ:CVTI).

What does the smart money think about Covenant Transportation Group, Inc. (NASDAQ:CVTI)?

Heading into the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 58% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably.

According to hedge fund intelligence website Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Covenant Transportation Group, Inc. (NASDAQ:CVTI). Renaissance Technologies has a $12.8 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $3.4 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedgies that hold long positions comprise Anand Parekh’s Alyeska Investment Group, Cliff Asness’s AQR Capital Management and Ken Fisher’s Fisher Asset Management.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, initiated the biggest position in Covenant Transportation Group, Inc. (NASDAQ:CVTI). Fisher Asset Management had $2.1 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated an $1.2 million position during the quarter. The other funds with brand new CVTI positions are Joel Greenblatt’s Gotham Asset Management, Ken Griffin’s Citadel Investment Group, and Matthew Lindenbaum’s Basswood Capital.

Let’s go over hedge fund activity in other stocks similar to Covenant Transportation Group, Inc. (NASDAQ:CVTI). We will take a look at Petmed Express Inc (NASDAQ:PETS), RTI Biologics Inc. (NASDAQ:RTIX), Neovasc Inc. (NASDAQ:NVCN), and Baldwin & Lyons Inc (NASDAQ:BWINB). This group of stocks’ market valuations resemble CVTI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PETS 9 41787 -1
RTIX 16 44325 0
NVCN 7 27280 1
BWINB 5 54221 0

Compared to these stocks Covenant Transportation Group, Inc. (NASDAQ:CVTI) is more popular among hedge funds and it registered a more significant boost in popularity among the smart money investors that we follow. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.