It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Saia Inc (NASDAQ:SAIA).
Saia Inc (NASDAQ:SAIA) shareholders have witnessed a decrease in hedge fund interest in recent months. SAIA was in 14 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with SAIA holdings at the end of the previous quarter. Our calculations also showed that SAIA isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action encompassing Saia Inc (NASDAQ:SAIA).
Hedge fund activity in Saia Inc (NASDAQ:SAIA)
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SAIA over the last 15 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 Saia Inc (NASDAQ:SAIA) was held by Royce & Associates, which reported holding $13.7 million worth of stock at the end of March. It was followed by Brant Point Investment Management with a $5.7 million position. Other investors bullish on the company included Balyasny Asset Management, GLG Partners, and D E Shaw.
Since Saia Inc (NASDAQ:SAIA) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that elected to cut their positions entirely in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $4.1 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund said goodbye to about $2.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Saia Inc (NASDAQ:SAIA) but similarly valued. These stocks are Glu Mobile Inc. (NASDAQ:GLUU), Magellan Health Inc (NASDAQ:MGLN), Pretium Resources Inc (NYSE:PVG), and NBT Bancorp Inc. (NASDAQ:NBTB). All of these stocks’ market caps are closest to SAIA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLUU | 25 | 130789 | 5 |
| MGLN | 21 | 383642 | 6 |
| PVG | 21 | 84984 | -1 |
| NBTB | 6 | 7940 | -3 |
| Average | 18.25 | 151839 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $39 million in SAIA’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Saia Inc (NASDAQ:SAIA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SAIA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAIA investors were disappointed as the stock returned 0.3% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
