We can judge whether Echo Global Logistics, Inc. (NASDAQ:ECHO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Echo Global Logistics, Inc. (NASDAQ:ECHO) investors should pay attention to an increase in activity from the world's largest hedge funds lately. ECHO was in 20 hedge funds' portfolios at the end of September. There were 12 hedge funds in our database with ECHO positions at the end of the previous quarter. Our calculations also showed that ECHO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26092" align="aligncenter" width="482"] Joel Greenblatt of Gotham Asset Management[/caption]
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 view the key hedge fund action regarding Echo Global Logistics, Inc. (NASDAQ:ECHO).
Hedge fund activity in Echo Global Logistics, Inc. (NASDAQ:ECHO)
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ECHO over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Echo Global Logistics, Inc. (NASDAQ:ECHO), which was worth $5.2 million at the end of the third quarter. On the second spot was Scopus Asset Management which amassed $4.9 million worth of shares. Renaissance Technologies, Intrinsic Edge Capital, and Gotham Asset Management 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 Intrinsic Edge Capital allocated the biggest weight to Echo Global Logistics, Inc. (NASDAQ:ECHO), around 0.38% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to ECHO.
As aggregate interest increased, some big names were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, established the most valuable position in Echo Global Logistics, Inc. (NASDAQ:ECHO). Scopus Asset Management had $4.9 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $3.4 million position during the quarter. The following funds were also among the new ECHO investors: Frederick DiSanto's Ancora Advisors, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and David Harding's Winton Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Echo Global Logistics, Inc. (NASDAQ:ECHO) but similarly valued. These stocks are Tristate Capital Holdings Inc (NASDAQ:TSC), SurModics, Inc. (NASDAQ:SRDX), AquaVenture Holdings Limited (NYSE:WAAS), and At Home Group Inc. (NYSE:HOME). This group of stocks' market valuations are similar to ECHO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSC,9,42321,-1 SRDX,13,138577,-1 WAAS,12,25073,3 HOME,16,201048,1 Average,12.5,101755,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $33 million in ECHO's case. At Home Group Inc. (NYSE:HOME) is the most popular stock in this table. On the other hand Tristate Capital Holdings Inc (NASDAQ:TSC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Echo Global Logistics, Inc. (NASDAQ:ECHO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ECHO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ECHO were disappointed as the stock returned -11.6% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.