Do Hedge Funds Love Rush Enterprises, Inc. (RUSHA)?

How do we determine whether Rush Enterprises, Inc. (NASDAQ:RUSHA) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Rush Enterprises, Inc. (NASDAQ:RUSHA) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. At the end of this article we will also compare RUSHA to other stocks, including 1st Source Corporation (NASDAQ:SRCE), Neenah Paper, Inc. (NYSE:NP), and Kaman Corporation (NYSE:KAMN) to get a better sense of its popularity.

In today’s marketplace there are numerous indicators stock market investors have at their disposal to appraise publicly traded companies. Two of the less known indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat their index-focused peers by a healthy amount (see the details here).

Now, we’re going to take a look at the new action surrounding Rush Enterprises, Inc. (NASDAQ:RUSHA).

How are hedge funds trading Rush Enterprises, Inc. (NASDAQ:RUSHA)?

At the Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Bill Miller’s Legg Mason Capital Management has the biggest position in Rush Enterprises, Inc. (NASDAQ:RUSHA), worth close to $8.2 million, amounting to 0.2% of its total 13F portfolio. The second most bullish fund manager is Ken Grossman and Glen Schneider’s SG Capital Management, with a $6.9 million position; 1.5% of its 13F portfolio is allocated to the stock. The remaining professional money managers with similar optimism include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Phil Frohlich’s Prescott Group Capital Management and Roger Ibbotson’s Zebra Capital Management.

Due to the fact that Rush Enterprises, Inc. (NASDAQ:RUSHA) has faced falling interest from the smart money, it’s easy to see that there was a specific group of fund managers who were dropping their positions entirely in the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $15.3 million in stock, and Jim Simons’ Renaissance Technologies was right behind this move, as the fund said goodbye to about $2.5 million worth of shares. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHA) but similarly valued. We will take a look at 1st Source Corporation (NASDAQ:SRCE), Neenah Paper, Inc. (NYSE:NP), Kaman Corporation (NYSE:KAMN), and Consolidated Communications Holdings Inc (NASDAQ:CNSL). All of these stocks’ market caps resemble RUSHA’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $77 million, compared to $26 million in RUSHA’s case. Kaman Corporation (NYSE:KAMN) is the most popular stock in this table. On the other hand 1st Source Corporation (NASDAQ:SRCE) is the least popular one with only 5 bullish hedge fund positions. Rush Enterprises, Inc. (NASDAQ:RUSHA) 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. In this regard KAMN might be a better candidate to consider a long position.