Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 24.4% compared to 20.4%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Forward Air Corporation (NASDAQ:FWRD) has experienced an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that FWRD isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing Forward Air Corporation (NASDAQ:FWRD).
Hedge fund activity in Forward Air Corporation (NASDAQ:FWRD)
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FWRD over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Forward Air Corporation (NASDAQ:FWRD) was held by Royce & Associates, which reported holding $51.8 million worth of stock at the end of March. It was followed by GLG Partners with a $12.6 million position. Other investors bullish on the company included Arrowstreet Capital, Balyasny Asset Management, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, created the most valuable position in Forward Air Corporation (NASDAQ:FWRD). Driehaus Capital had $0.8 million invested in the company at the end of the quarter. Hoon Kim’s Quantinno Capital also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Steve Cohen’s Point72 Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Forward Air Corporation (NASDAQ:FWRD) but similarly valued. We will take a look at Audentes Therapeutics, Inc. (NASDAQ:BOLD), Crescent Point Energy Corp (NYSE:CPG), Valaris plc (NYSE:ESV), and Global Net Lease, Inc. (NYSE:GNL). This group of stocks’ market valuations resemble FWRD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOLD | 27 | 643203 | 1 |
| CPG | 12 | 65098 | -5 |
| ESV | 28 | 433554 | 7 |
| GNL | 8 | 46148 | -3 |
| Average | 18.75 | 297001 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $102 million in FWRD’s case. Valaris plc (NYSE:ESV) is the most popular stock in this table. On the other hand Global Net Lease, Inc. (NYSE:GNL) is the least popular one with only 8 bullish hedge fund positions. Forward Air Corporation (NASDAQ:FWRD) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FWRD as the stock returned 8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
