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 Schneider National, Inc. (NYSE:SNDR).
Schneider National, Inc. (NYSE:SNDR) investors should be aware of an increase in hedge fund interest recently. SNDR was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 18 hedge funds in our database with SNDR positions at the end of the previous quarter. Our calculations also showed that SNDR 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).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 41 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.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Schneider National, Inc. (NYSE:SNDR).
How are hedge funds trading Schneider National, Inc. (NYSE:SNDR)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in SNDR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Schneider National, Inc. (NYSE:SNDR) was held by Balyasny Asset Management, which reported holding $30.7 million worth of stock at the end of September. It was followed by Millennium Management with a $23.5 million position. Other investors bullish on the company included Two Sigma Advisors, AQR Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Centenus Global Management allocated the biggest weight to Schneider National, Inc. (NYSE:SNDR), around 0.39% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, designating 0.18 percent of its 13F equity portfolio to SNDR.
Now, some big names have been driving this bullishness. Scopus Asset Management, managed by Alexander Mitchell, created the largest position in Schneider National, Inc. (NYSE:SNDR). Scopus Asset Management had $2.7 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new SNDR investors: David Harding’s Winton Capital Management, Minhua Zhang’s Weld Capital Management, and Qing Li’s Sciencast Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Schneider National, Inc. (NYSE:SNDR) but similarly valued. We will take a look at New Relic Inc (NYSE:NEWR), FirstService Corporation (NASDAQ:FSV), Laureate Education, Inc. (NASDAQ:LAUR), and Outfront Media Inc (NYSE:OUT). This group of stocks’ market values resemble SNDR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEWR | 44 | 933575 | 8 |
| FSV | 12 | 170393 | -1 |
| LAUR | 34 | 360118 | 7 |
| OUT | 31 | 486631 | -2 |
| Average | 30.25 | 487679 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $115 million in SNDR’s case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 12 bullish hedge fund positions. Schneider National, Inc. (NYSE:SNDR) is not the least popular stock in this group but hedge fund interest is still below average. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on SNDR as the stock returned -15.2% during the same time period and outperformed the market by an even larger margin.
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.
