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 latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Forward Air Corporation (NASDAQ:FWRD).
Forward Air Corporation (NASDAQ:FWRD) investors should be aware of a decrease in support from the world's most elite money managers recently. Our calculations also showed that FWRD 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.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. 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. 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. With all of this in mind let's take a peek at the new hedge fund action surrounding Forward Air Corporation (NASDAQ:FWRD).
Hedge fund activity in Forward Air Corporation (NASDAQ:FWRD)
At Q4's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in FWRD over the last 18 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Forward Air Corporation (NASDAQ:FWRD), which was worth $54.2 million at the end of the third quarter. On the second spot was GLG Partners which amassed $21.3 million worth of shares. Millennium Management, Scopus Asset Management, and Arrowstreet 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 Royce & Associates allocated the biggest weight to Forward Air Corporation (NASDAQ:FWRD), around 0.48% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, earmarking 0.38 percent of its 13F equity portfolio to FWRD.
Since Forward Air Corporation (NASDAQ:FWRD) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of fund managers that decided to sell off their positions entirely heading into Q4. Intriguingly, Dmitry Balyasny's Balyasny Asset Management cut the biggest position of the 750 funds monitored by Insider Monkey, totaling close to $6.5 million in stock. Donald Sussman's fund, Paloma Partners, also cut its stock, about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Forward Air Corporation (NASDAQ:FWRD) but similarly valued. We will take a look at FormFactor, Inc. (NASDAQ:FORM), Patterson Companies, Inc. (NASDAQ:PDCO), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), and Karuna Therapeutics, Inc. (NASDAQ:KRTX). This group of stocks' market values are closest to FWRD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FORM,22,128673,3 PDCO,25,182608,3 APLS,31,417192,7 KRTX,15,136671,6 Average,23.25,216286,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $137 million in FWRD's case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand Karuna Therapeutics, Inc. (NASDAQ:KRTX) is the least popular one with only 15 bullish hedge fund positions. Forward Air Corporation (NASDAQ:FWRD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds 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 beat the market by 4.2 percentage points. Unfortunately FWRD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FWRD investors were disappointed as the stock returned -28.2% 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 in 2020. 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.