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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Echo Global Logistics, Inc. (NASDAQ:ECHO).
Is Echo Global Logistics, Inc. (NASDAQ:ECHO) a bargain? Hedge funds were turning bullish. The number of bullish hedge fund positions advanced by 1 lately. Echo Global Logistics, Inc. (NASDAQ:ECHO) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that ECHO 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 13 hedge funds in our database with ECHO positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 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. 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.
Richard Driehaus of Driehaus 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. With all of this in mind let's view the recent hedge fund action regarding Echo Global Logistics, Inc. (NASDAQ:ECHO).
Do Hedge Funds Think ECHO Is A Good Stock To Buy Now?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ECHO over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Echo Global Logistics, Inc. (NASDAQ:ECHO). Arrowstreet Capital has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $7.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise Richard Driehaus's Driehaus Capital, D. E. Shaw's D E Shaw and Alexander Mitchell's Scopus Asset Management. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to Echo Global Logistics, Inc. (NASDAQ:ECHO), around 0.13% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to ECHO.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, established the biggest position in Echo Global Logistics, Inc. (NASDAQ:ECHO). Driehaus Capital had $6.2 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are David Harding's Winton Capital Management, Donald Sussman's Paloma Partners, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks similar to Echo Global Logistics, Inc. (NASDAQ:ECHO). These stocks are Great Western Bancorp Inc (NYSE:GWB), PBF Energy Inc (NYSE:PBF), PDF Solutions, Inc. (NASDAQ:PDFS), Brookline Bancorp, Inc. (NASDAQ:BRKL), Oaktree Specialty Lending Corporation (NASDAQ:OCSL), Oxford Industries, Inc. (NYSE:OXM), and Tivity Health, Inc. (NASDAQ:TVTY). This group of stocks' market caps resemble ECHO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GWB,14,28097,-4 PBF,16,68594,-1 PDFS,10,16132,-3 BRKL,13,37670,2 OCSL,14,48848,2 OXM,8,34340,-4 TVTY,17,233432,1 Average,13.1,66730,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $34 million in ECHO's case. Tivity Health, Inc. (NASDAQ:TVTY) is the most popular stock in this table. On the other hand Oxford Industries, Inc. (NYSE:OXM) is the least popular one with only 8 bullish hedge fund positions. Echo Global Logistics, Inc. (NASDAQ:ECHO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ECHO is 58.4. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ECHO as the stock returned 13.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.