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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider U.S. Xpress Enterprises, Inc. (NYSE:USX) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is USX a good stock to buy now? The best stock pickers were taking a bullish view. The number of long hedge fund bets went up by 6 recently. U.S. Xpress Enterprises, Inc. (NYSE:USX) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 18. Our calculations also showed that USX 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). There were 6 hedge funds in our database with USX positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 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.
Nick Thakore of Diametric 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 we're going to take a glance at the key hedge fund action encompassing U.S. Xpress Enterprises, Inc. (NYSE:USX).
Do Hedge Funds Think USX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in USX a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of U.S. Xpress Enterprises, Inc. (NYSE:USX), with a stake worth $3 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $2.3 million. D E Shaw, Diametric Capital, 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 Diametric Capital allocated the biggest weight to U.S. Xpress Enterprises, Inc. (NYSE:USX), around 1.3% of its 13F portfolio. Prelude Capital (previously Springbok Capital) is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to USX.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, assembled the largest position in U.S. Xpress Enterprises, Inc. (NYSE:USX). Renaissance Technologies had $2.3 million invested in the company at the end of the quarter. Nick Thakore's Diametric Capital also made a $1.7 million investment in the stock during the quarter. The other funds with brand new USX positions are Israel Englander's Millennium Management, Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital), and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as U.S. Xpress Enterprises, Inc. (NYSE:USX) but similarly valued. These stocks are ProPetro Holding Corp. (NYSE:PUMP), Beazer Homes USA, Inc. (NYSE:BZH), Dorian LPG Ltd (NYSE:LPG), International Seaways, Inc. (NYSE:INSW), China Online Education Group (NYSE:COE), CBTX, Inc. (NASDAQ:CBTX), and Amryt Pharma plc (NASDAQ:AMYT). This group of stocks' market valuations match USX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PUMP,17,40802,-1 BZH,15,30587,-4 LPG,14,88313,-1 INSW,15,75625,-4 COE,4,20308,-1 CBTX,8,10588,0 AMYT,4,24862,4 Average,11,41584,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $14 million in USX's case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand China Online Education Group (NYSE:COE) is the least popular one with only 4 bullish hedge fund positions. U.S. Xpress Enterprises, Inc. (NYSE:USX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for USX is 60.8. 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 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately USX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on USX were disappointed as the stock returned -12.8% since the end of September (through 12/8) 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.
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Disclosure: None. This article was originally published at Insider Monkey.