Were Hedge Funds Right About Flocking Into Marten Transport, Ltd (MRTN) ?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Marten Transport, Ltd (NASDAQ:MRTN).

Marten Transport, Ltd (NASDAQ:MRTN) was in 17 hedge funds’ portfolios at the end of December. MRTN investors should be aware of an increase in hedge fund sentiment of late. There were 14 hedge funds in our database with MRTN holdings at the end of the previous quarter. Our calculations also showed that mrtn 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 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. 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 view the recent hedge fund action regarding Marten Transport, Ltd (NASDAQ:MRTN).

How have hedgies been trading Marten Transport, Ltd (NASDAQ:MRTN)?

At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the second quarter of 2018. On the other hand, there were a total of 19 hedge funds with a bullish position in MRTN a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with MRTN Positions

More specifically, Empirical Capital Partners was the largest shareholder of Marten Transport, Ltd (NASDAQ:MRTN), with a stake worth $8.7 million reported as of the end of December. Trailing Empirical Capital Partners was MSDC Management, which amassed a stake valued at $8.1 million. 12th Street Asset Management, Millennium Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, some big names have jumped into Marten Transport, Ltd (NASDAQ:MRTN) headfirst. Renaissance Technologies, managed by Jim Simons, established the biggest position in Marten Transport, Ltd (NASDAQ:MRTN). Renaissance Technologies had $1.1 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new MRTN investors: Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, Joel Greenblatt’s Gotham Asset Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks similar to Marten Transport, Ltd (NASDAQ:MRTN). These stocks are Cray Inc. (NASDAQ:CRAY), CONSOL Energy Inc. (NYSE:CEIX), ScanSource, Inc. (NASDAQ:SCSC), and ArcBest Corp (NASDAQ:ARCB). All of these stocks’ market caps match MRTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRAY 14 62131 1
CEIX 25 123293 6
SCSC 12 50297 4
ARCB 10 38491 -4
Average 15.25 68553 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $44 million in MRTN’s case. CONSOL Energy Inc.(NYSE:CEIX) is the most popular stock in this table. On the other hand ArcBest Corp (NASDAQ:ARCB) is the least popular one with only 10 bullish hedge fund positions. Marten Transport, Ltd (NASDAQ:MRTN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MRTN as the stock returned 26% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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