Is Rush Enterprises, Inc. (RUSHB) A Good Stock To Buy?

Is Rush Enterprises, Inc. (NASDAQ:RUSHB) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Is Rush Enterprises, Inc. (NASDAQ:RUSHB) a splendid investment now? Hedge funds are getting less optimistic. The number of long hedge fund bets retreated by 2 lately. RUSHB was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. There were 6 hedge funds in our database with RUSHB positions at the end of the previous quarter. In terms of the stock market sentiment, the stock of Rush Enterprises, Inc. (NASDAQ:RUSHB) fell 2.88% throughout the quarter, echoing the same behavior as that of the hedge funds.

For an in-depth understanding of the hedge fund behavior surrounding Rush Enterprises, Inc., we will compare it to other stocks with similar market caps, including State Auto Financial Corp (NASDAQ:STFC), Textainer Group Holdings Limited (NYSE:TGH), and Inogen Inc (NASDAQ:INGN) to get a better sense of its popularity.

In the financial world, there are a large number of indicators market participants employ to evaluate stocks. A pair of the less utilized indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best money managers can outperform the S&P 500 by a healthy margin (see the details here).

Now, let’s take a peek at the recent action surrounding Rush Enterprises, Inc. (NASDAQ:RUSHB).

What have hedge funds been doing with Rush Enterprises, Inc. (NASDAQ:RUSHB)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 33% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund and institutional investor database, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Rush Enterprises, Inc. (NASDAQ:RUSHB). GAMCO Investors has a $14.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Quincy Lee of Ancient Art (Teton Capital), with a $14 million position; 2.4% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions contain Renaissance Technologies, and Israel Englander’s Millennium Management.

Because Rush Enterprises, Inc. (NASDAQ:RUSHB) has witnessed a declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that elected to cut their full holdings last quarter. Intriguingly, Noah Levy and Eugene Dozortsev’s Newtyn Management sold off the largest investment of the 700 funds monitored by Insider Monkey, valued at about $12.8 million in stock. Andrew Goldman’s fund, Seven Locks Capital Management, also dumped its stock, about $1.3 million worth of shares. These transactions are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHB) but similarly valued. These stocks are State Auto Financial Corp (NASDAQ:STFC), Textainer Group Holdings Limited (NYSE:TGH), Inogen Inc (NASDAQ:INGN), and Changyou.Com Ltd (ADR) (NASDAQ:CYOU). All of these stocks’ market caps match Rush Enterprises, Inc. (NASDAQ:RUSHB)’s market cap.

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $32 million in Rush Enterprises, Inc. (NASDAQ:RUSHB)’s case. Inogen Inc (NASDAQ:INGN) is the most popular stock in this table. On the other hand, State Auto Financial Corp (NASDAQ:STFC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Rush Enterprises, Inc. (NASDAQ:RUSHB) is even less popular than State Auto Financial Corp (NASDAQ:STFC). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.