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Is USA Truck, Inc. (USAK) Going to Burn These Hedge Funds?

Debasis Saha

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of USA Truck, Inc. (NASDAQ:USAK).

Is USA Truck, Inc. (NASDAQ:USAK) worth your attention right now? Prominent investors are in a pessimistic mood. The number of long hedge fund bets were trimmed by 5 in recent months. Our calculations also showed that USAK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). USAK was in 6 hedge funds' portfolios at the end of September. There were 11 hedge funds in our database with USAK holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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_746893" align="alignnone" width="1613"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace
Paul Marshall Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's take a glance at the fresh hedge fund action encompassing USA Truck, Inc. (NASDAQ:USAK).

Hedge fund activity in USA Truck, Inc. (NASDAQ:USAK)

At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in USAK a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is USAK A Good Stock To Buy?
Is USAK A Good Stock To Buy?

Among these funds, Marshall Wace held the most valuable stake in USA Truck, Inc. (NASDAQ:USAK), which was worth $1.2 million at the end of the third quarter. On the second spot was Scopus Asset Management which amassed $0.9 million worth of shares. D E Shaw, Two Sigma Advisors, and Millennium 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 Scopus Asset Management allocated the biggest weight to USA Truck, Inc. (NASDAQ:USAK), around 0.03% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to USAK.

Since USA Truck, Inc. (NASDAQ:USAK) has faced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds that decided to sell off their entire stakes by the end of the third quarter. It's worth mentioning that Matthew Hulsizer's PEAK6 Capital Management cut the largest position of the 750 funds tracked by Insider Monkey, valued at an estimated $1.4 million in stock, Renaissance Technologies was right behind this move, as the fund dropped about $1.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as USA Truck, Inc. (NASDAQ:USAK) but similarly valued. These stocks are InterNAP Network Services (NASDAQ:INAP), Newater Technology, Inc. (NASDAQ:NEWA), Blink Charging Co. (NASDAQ:BLNK), and Key Tronic Corporation (NASDAQ:KTCC). All of these stocks' market caps resemble USAK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INAP,9,18298,1 NEWA,1,98,0 BLNK,2,87,0 KTCC,2,1301,1 Average,3.5,4946,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $4 million in USAK's case. InterNAP Network Services (NASDAQ:INAP) is the most popular stock in this table. On the other hand Newater Technology, Inc. (NASDAQ:NEWA) is the least popular one with only 1 bullish hedge fund positions. USA Truck, Inc. (NASDAQ:USAK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 USAK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on USAK were disappointed as the stock returned -5.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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