How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Saia Inc (NASDAQ:SAIA).
Is SAIA a good stock to buy now? Saia Inc (NASDAQ:SAIA) has seen an increase in activity from the world's largest hedge funds recently. Saia Inc (NASDAQ:SAIA) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SAIA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's review the fresh hedge fund action regarding Saia Inc (NASDAQ:SAIA).
Do Hedge Funds Think SAIA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SAIA over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Saia Inc (NASDAQ:SAIA) was held by Royce & Associates, which reported holding $10.9 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $9.6 million position. Other investors bullish on the company included Select Equity Group, Brant Point Investment Management, and Moore Global Investments. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Saia Inc (NASDAQ:SAIA), around 2.91% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, earmarking 0.74 percent of its 13F equity portfolio to SAIA.
As aggregate interest increased, key hedge funds have jumped into Saia Inc (NASDAQ:SAIA) headfirst. Select Equity Group, managed by Robert Joseph Caruso, established the biggest position in Saia Inc (NASDAQ:SAIA). Select Equity Group had $8.8 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $2.5 million position during the quarter. The following funds were also among the new SAIA investors: Noam Gottesman's GLG Partners, Greg Eisner's Engineers Gate Manager, and Mika Toikka's AlphaCrest Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Saia Inc (NASDAQ:SAIA) but similarly valued. We will take a look at J2 Global Inc (NASDAQ:JCOM), Armstrong World Industries, Inc. (NYSE:AWI), Seaboard Corporation (NYSE:SEB), PNM Resources, Inc. (NYSE:PNM), SelectQuote, Inc. (NYSE:SLQT), Schrodinger, Inc. (NASDAQ:SDGR), and Reata Pharmaceuticals, Inc. (NASDAQ:RETA). This group of stocks' market caps match SAIA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JCOM,25,222865,-5 AWI,30,351590,-4 SEB,16,120834,2 PNM,23,385999,-2 SLQT,14,217874,-15 SDGR,24,402321,9 RETA,25,249642,-9 Average,22.4,278732,-3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $68 million in SAIA's case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand SelectQuote, Inc. (NYSE:SLQT) is the least popular one with only 14 bullish hedge fund positions. Saia Inc (NASDAQ:SAIA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAIA is 56.8. 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. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on SAIA as the stock returned 43.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.