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Hub Group Inc (HUBG) Fell Out Of Favor With Hedge Funds

·6 min read

In this article we will check out the progression of hedge fund sentiment towards Hub Group Inc (NASDAQ:HUBG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hub Group Inc (NASDAQ:HUBG) has seen a decrease in support from the world's most elite money managers recently. Hub Group Inc (NASDAQ:HUBG) was in 19 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 23. Our calculations also showed that HUBG isn't among the 30 most popular stocks among hedge funds (click for Q1 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Joel Greenblatt Gotham Asset Management
Joel Greenblatt Gotham Asset Management

Joel Greenblatt of Gotham Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's take a look at the fresh hedge fund action surrounding Hub Group Inc (NASDAQ:HUBG).

Do Hedge Funds Think HUBG Is A Good Stock To Buy Now?

At the end of March, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HUBG over the last 23 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is HUBG A Good Stock To Buy?
Is HUBG A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in Hub Group Inc (NASDAQ:HUBG), which was worth $66.1 million at the end of the fourth quarter. On the second spot was Scopus Asset Management which amassed $40.5 million worth of shares. Royce & Associates, Diamond Hill Capital, and Citadel Investment Group 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 Southport Management allocated the biggest weight to Hub Group Inc (NASDAQ:HUBG), around 2.74% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, dishing out 0.51 percent of its 13F equity portfolio to HUBG.

Since Hub Group Inc (NASDAQ:HUBG) has faced bearish sentiment from hedge fund managers, logic holds that there were a few fund managers that slashed their full holdings heading into Q2. At the top of the heap, Renaissance Technologies dumped the largest position of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $2.3 million in stock. Mark Coe's fund, Coe Capital Management, also said goodbye to its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q2.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Hub Group Inc (NASDAQ:HUBG) but similarly valued. These stocks are BancFirst Corporation (NASDAQ:BANF), Cactus, Inc. (NYSE:WHD), NIC Inc. (NASDAQ:EGOV), Welbilt, Inc. (NYSE:WBT), Phreesia, Inc. (NYSE:PHR), PQ Group Holdings Inc. (NYSE:PQG), and Greatbatch Inc (NYSE:GB). This group of stocks' market values resemble HUBG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BANF,4,1668,2 WHD,20,135752,1 EGOV,34,346790,19 WBT,28,400427,3 PHR,27,213201,1 PQG,8,32900,-1 GB,16,1810814,1 Average,19.6,420222,3.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $420 million. That figure was $229 million in HUBG's case. NIC Inc. (NASDAQ:EGOV) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 4 bullish hedge fund positions. Hub Group Inc (NASDAQ:HUBG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HUBG is 51.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately HUBG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HUBG investors were disappointed as the stock returned -4.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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