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Here’s What Hedge Funds Think About Rush Enterprises, Inc. (RUSHA)

Reymerlyn Martin

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Rush Enterprises, Inc. (NASDAQ:RUSHA).

Rush Enterprises, Inc. (NASDAQ:RUSHA) investors should pay attention to an increase in enthusiasm from smart money recently. RUSHA was in 21 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 20 hedge funds in our database with RUSHA positions at the end of the previous quarter. Our calculations also showed that RUSHA isn't among the 30 most popular stocks among hedge funds.

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.

Roger Ibbotson Zebra Capital
Roger Ibbotson Zebra Capital

We're going to take a look at the latest hedge fund action surrounding Rush Enterprises, Inc. (NASDAQ:RUSHA).

How are hedge funds trading Rush Enterprises, Inc. (NASDAQ:RUSHA)?

At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in RUSHA a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

RUSHA_apr2019
RUSHA_apr2019

Among these funds, Renaissance Technologies held the most valuable stake in Rush Enterprises, Inc. (NASDAQ:RUSHA), which was worth $25.6 million at the end of the fourth quarter. On the second spot was Park West Asset Management which amassed $21.5 million worth of shares. Moreover, Prescott Group Capital Management, Marshall Wace LLP, and Millennium Management were also bullish on Rush Enterprises, Inc. (NASDAQ:RUSHA), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, key money managers have jumped into Rush Enterprises, Inc. (NASDAQ:RUSHA) headfirst. 12th Street Asset Management, managed by Michael O'Keefe, established the most outsized position in Rush Enterprises, Inc. (NASDAQ:RUSHA). 12th Street Asset Management had $1.9 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Roger Ibbotson's Zebra Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHA) but similarly valued. We will take a look at Kronos Worldwide, Inc. (NYSE:KRO), Park National Corporation (NYSEAMEX:PRK), QEP Resources Inc (NYSE:QEP), and Chesapeake Utilities Corporation (NYSE:CPK). This group of stocks' market caps match RUSHA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRO,14,38841,-3 PRK,7,12521,-5 QEP,25,219271,3 CPK,10,34548,1 Average,14,76295,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $95 million in RUSHA's case. QEP Resources Inc (NYSE:QEP) is the most popular stock in this table. On the other hand Park National Corporation (NYSEAMEX:PRK) is the least popular one with only 7 bullish hedge fund positions. Rush Enterprises, Inc. (NASDAQ:RUSHA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on RUSHA as the stock returned 27.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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