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Is Werner Enterprises, Inc. (WERN) A Good Stock To Buy?

Reymerlyn Martin

We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Werner Enterprises, Inc. (NASDAQ:WERN) based on that data.

Is Werner Enterprises, Inc. (NASDAQ:WERN) ready to rally soon? Hedge funds are betting on the stock. The number of long hedge fund bets rose by 2 recently. Our calculations also showed that WERN isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Chuck Royce

Let's analyze the key hedge fund action regarding Werner Enterprises, Inc. (NASDAQ:WERN).

Hedge fund activity in Werner Enterprises, Inc. (NASDAQ:WERN)

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in WERN a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

WERN_jun2019

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Werner Enterprises, Inc. (NASDAQ:WERN). AQR Capital Management has a $35.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $26.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Chuck Royce's Royce & Associates.

Consequently, some big names have jumped into Werner Enterprises, Inc. (NASDAQ:WERN) headfirst. Scopus Asset Management, managed by Alexander Mitchell, created the biggest position in Werner Enterprises, Inc. (NASDAQ:WERN). Scopus Asset Management had $3.4 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $1.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Joel Greenblatt's Gotham Asset Management, and Michael Gelband's ExodusPoint Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Werner Enterprises, Inc. (NASDAQ:WERN) but similarly valued. We will take a look at Whiting Petroleum Corporation (NYSE:WLL), AAON, Inc. (NASDAQ:AAON), Argo Group International Holdings, Ltd. (NYSE:ARGO), and El Paso Electric Company (NYSE:EE). This group of stocks' market values are similar to WERN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLL,25,360912,-8 AAON,5,3625,-1 ARGO,17,200431,4 EE,22,348987,-1 Average,17.25,228489,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $127 million in WERN's case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 5 bullish hedge fund positions. Werner Enterprises, Inc. (NASDAQ:WERN) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately WERN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WERN investors were disappointed as the stock returned -0.4% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.

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

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