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Should You Buy Roadrunner Transportation Systems Inc (RRTS)?

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Roadrunner Transportation Systems Inc (NYSE:RRTS).

Roadrunner Transportation Systems Inc (NYSE:RRTS) shareholders have witnessed an increase in support from the world's most elite money managers recently. Our calculations also showed that RRTS isn't among the 30 most popular stocks among hedge funds.

According to most shareholders, hedge funds are assumed to be unimportant, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the masters of this group, around 750 funds. Most estimates calculate that this group of people command the lion's share of all hedge funds' total capital, and by keeping an eye on their finest stock picks, Insider Monkey has discovered many investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_26345" align="aligncenter" width="489"] Paul Singer of Elliott Management[/caption]

Paul Singer ELLIOTT MANAGEMENT

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action surrounding Roadrunner Transportation Systems Inc (NYSE:RRTS).

How have hedgies been trading Roadrunner Transportation Systems Inc (NYSE:RRTS)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in RRTS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

RRTS_nov2019

More specifically, Elliott Management was the largest shareholder of Roadrunner Transportation Systems Inc (NYSE:RRTS), with a stake worth $353.3 million reported as of the end of September. Trailing Elliott Management was Solas Capital Management, which amassed a stake valued at $3 million. Renaissance Technologies was 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 Solas Capital Management allocated the biggest weight to Roadrunner Transportation Systems Inc (NYSE:RRTS), around 3.15% of its portfolio. Elliott Management is also relatively very bullish on the stock, setting aside 2.94 percent of its 13F equity portfolio to RRTS.

There weren't any hedge funds initiating brand new positions in the stock during the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Roadrunner Transportation Systems Inc (NYSE:RRTS) but similarly valued. These stocks are Avedro, Inc. (NASDAQ:AVDR), Bar Harbor Bankshares (NYSE:BHB), Establishment Labs Holdings Inc. (NASDAQ:ESTA), and PAR Technology Corporation (NYSE:PAR). This group of stocks' market caps are similar to RRTS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVDR,7,116451,-1 BHB,6,16384,3 ESTA,7,57678,0 PAR,8,54520,3 Average,7,61258,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $357 million in RRTS's case. PAR Technology Corporation (NYSE:PAR) is the most popular stock in this table. On the other hand Bar Harbor Bankshares (NYSE:BHB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Roadrunner Transportation Systems Inc (NYSE:RRTS) is even less popular than BHB. Hedge funds dodged a bullet by taking a bearish stance towards RRTS. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately RRTS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RRTS investors were disappointed as the stock returned -7% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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