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Werner Enterprises, Inc. (WERN): Hedge Funds Are Snapping Up

Nina Todic

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Werner Enterprises, Inc. (NASDAQ:WERN) based on that data.

Is Werner Enterprises, Inc. (NASDAQ:WERN) the right investment to pursue these days? Hedge funds are turning bullish. The number of bullish hedge fund bets inched up by 3 recently. Our calculations also showed that WERN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WERN was in 18 hedge funds' portfolios at the end of September. There were 15 hedge funds in our database with WERN positions 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

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.

[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the recent hedge fund action surrounding Werner Enterprises, Inc. (NASDAQ:WERN).

What does smart money think about Werner Enterprises, Inc. (NASDAQ:WERN)?

Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in WERN a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Werner Enterprises, Inc. (NASDAQ:WERN), which was worth $39.6 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $16.2 million worth of shares. Citadel Investment Group, Arrowstreet Capital, and Two Sigma Advisors 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 12th Street Asset Management allocated the biggest weight to Werner Enterprises, Inc. (NASDAQ:WERN), around 0.33% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to WERN.

As industrywide interest jumped, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Werner Enterprises, Inc. (NASDAQ:WERN). Arrowstreet Capital had $10.3 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $4.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Hoon Kim's Quantinno Capital, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's now take a look at hedge fund activity in other stocks similar to Werner Enterprises, Inc. (NASDAQ:WERN). These stocks are The Chemours Company (NYSE:CC), Saia Inc (NASDAQ:SAIA), Lattice Semiconductor Corporation (NASDAQ:LSCC), and Tilray, Inc. (NASDAQ:TLRY). This group of stocks' market values are closest to WERN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CC,29,273189,1 SAIA,13,66696,4 LSCC,24,232643,4 TLRY,11,19410,0 Average,19.25,147985,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $113 million in WERN's case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 11 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 4.4% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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