We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Rush Enterprises, Inc. (NASDAQ:RUSHA).
Rush Enterprises, Inc. (NASDAQ:RUSHA) was in 24 hedge funds’ portfolios at the end of December. RUSHA has experienced an increase in support from the world’s most elite money managers lately. There were 21 hedge funds in our database with RUSHA holdings at the end of the previous quarter. Our calculations also showed that RUSHA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most investors, hedge funds are assumed to be underperforming, old financial tools of years past. While there are over 8000 funds with their doors open at present, Our experts look at the upper echelon of this group, approximately 850 funds. Most estimates calculate that this group of people handle most of all hedge funds’ total capital, and by monitoring their matchless investments, Insider Monkey has brought to light several investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the latest hedge fund action surrounding Rush Enterprises, Inc. (NASDAQ:RUSHA).
How are hedge funds trading Rush Enterprises, Inc. (NASDAQ:RUSHA)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in RUSHA over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Rush Enterprises, Inc. (NASDAQ:RUSHA). Renaissance Technologies has a $20.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $13.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Richard Driehaus’s Driehaus Capital, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Rush Enterprises, Inc. (NASDAQ:RUSHA), around 1.13% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.71 percent of its 13F equity portfolio to RUSHA.
Now, key money managers have jumped into Rush Enterprises, Inc. (NASDAQ:RUSHA) headfirst. Driehaus Capital, managed by Richard Driehaus, established the largest position in Rush Enterprises, Inc. (NASDAQ:RUSHA). Driehaus Capital had $9.6 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.9 million position during the quarter. The other funds with brand new RUSHA positions are Mike Vranos’s Ellington, Donald Sussman’s Paloma Partners, and Minhua Zhang’s Weld Capital Management.
Let’s go over 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 Ballard Power Systems Inc. (NASDAQ:BLDP), Edgewell Personal Care Company (NYSE:EPC), Park National Corporation (NYSE:PRK), and Core Laboratories N.V. (NYSE:CLB). This group of stocks’ market values are closest to RUSHA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLDP | 6 | 2731 | 0 |
| EPC | 26 | 233741 | 6 |
| PRK | 10 | 15018 | 1 |
| CLB | 25 | 118775 | 9 |
| Average | 16.75 | 92566 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $83 million in RUSHA’s case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Ballard Power Systems Inc. (NASDAQ:BLDP) is the least popular one with only 6 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. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately RUSHA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RUSHA were disappointed as the stock returned -33.6% 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
