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Were Hedge Funds Right About Rush Enterprises, Inc. (RUSHB)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Rush Enterprises, Inc. (NASDAQ:RUSHB).

Rush Enterprises, Inc. (NASDAQ:RUSHB) was in 4 hedge funds’ portfolios at the end of December. RUSHB investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 3 hedge funds in our database with RUSHB positions at the end of the previous quarter. Our calculations also showed that RUSHB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the key hedge fund action regarding Rush Enterprises, Inc. (NASDAQ:RUSHB).

What does smart money think about Rush Enterprises, Inc. (NASDAQ:RUSHB)?

At Q4’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RUSHB over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mario Gabelli’s GAMCO Investors has the number one position in Rush Enterprises, Inc. (NASDAQ:RUSHB), worth close to $28 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, founded by Jim Simons, holding a $12.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish consist of Ken Griffin’s Citadel Investment Group, and Frederick DiSanto’s Ancora Advisors. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Rush Enterprises, Inc. (NASDAQ:RUSHB), around 0.22% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to RUSHB.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Ancora Advisors, managed by Frederick DiSanto, established the largest position in Rush Enterprises, Inc. (NASDAQ:RUSHB). Ancora Advisors had $0 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHB) but similarly valued. We will take a look at Berkshire Hills Bancorp, Inc. (NYSE:BHLB), National Research Corporation (NASDAQ:NRC), Kite Realty Group Trust (NYSE:KRG), and BP Midstream Partners LP (NYSE:BPMP). This group of stocks’ market values match RUSHB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHLB 9 41712 -3
NRC 9 54049 -1
KRG 13 81500 2
BPMP 6 27556 0
Average 9.25 51204 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $41 million in RUSHB’s case. Kite Realty Group Trust (NYSE:KRG) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Rush Enterprises, Inc. (NASDAQ:RUSHB) is even less popular than BPMP. Hedge funds dodged a bullet by taking a bearish stance towards RUSHB. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately RUSHB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RUSHB investors were disappointed as the stock returned -35.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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