Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Heartland Express, Inc. (NASDAQ:HTLD) a good investment now? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions shrunk by 4 in recent months. Our calculations also showed that HTLD isn't among the 30 most popular stocks among hedge funds. HTLD was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 11 hedge funds in our database with HTLD positions at the end of the previous quarter.
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.
Let's take a look at the latest hedge fund action regarding Heartland Express, Inc. (NASDAQ:HTLD).
What have hedge funds been doing with Heartland Express, Inc. (NASDAQ:HTLD)?
Heading into the first quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in HTLD a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Two Sigma Advisors was the largest shareholder of Heartland Express, Inc. (NASDAQ:HTLD), with a stake worth $2.6 million reported as of the end of December. Trailing Two Sigma Advisors was Renaissance Technologies, which amassed a stake valued at $1.2 million. D E Shaw, Holocene Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Heartland Express, Inc. (NASDAQ:HTLD) has witnessed a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers who were dropping their entire stakes last quarter. It's worth mentioning that Israel Englander's Millennium Management sold off the largest position of all the hedgies tracked by Insider Monkey, valued at about $8.4 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $4.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Heartland Express, Inc. (NASDAQ:HTLD) but similarly valued. We will take a look at Yext, Inc. (NYSE:YEXT), National Storage Affiliates Trust (NYSE:NSA), Medifast, Inc. (NYSE:MED), and Liberty Oilfield Services Inc. (NYSE:LBRT). This group of stocks' market valuations match HTLD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YEXT,13,129557,-3 NSA,17,107661,0 MED,22,270358,0 LBRT,12,75972,4 Average,16,145887,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $8 million in HTLD's case. Medifast, Inc. (NYSE:MED) is the most popular stock in this table. On the other hand Liberty Oilfield Services Inc. (NYSE:LBRT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Heartland Express, Inc. (NASDAQ:HTLD) is even less popular than LBRT. Hedge funds dodged a bullet by taking a bearish stance towards HTLD. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HTLD wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); HTLD investors were disappointed as the stock returned 12.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.