We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Saia Inc (NASDAQ:SAIA).
Is Saia Inc (NASDAQ:SAIA) the right pick for your portfolio? Money managers are in a bullish mood. The number of long hedge fund positions moved up by 4 lately. Our calculations also showed that SAIA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SAIA was in 13 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with SAIA positions at the end of the previous quarter.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing Saia Inc (NASDAQ:SAIA).
What does smart money think about Saia Inc (NASDAQ:SAIA)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in SAIA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Driehaus Capital held the most valuable stake in Saia Inc (NASDAQ:SAIA), which was worth $16.1 million at the end of the third quarter. On the second spot was Carlson Capital which amassed $13.6 million worth of shares. Royce & Associates, Citadel Investment Group, and Brant Point Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to Saia Inc (NASDAQ:SAIA), around 0.52% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, dishing out 0.5 percent of its 13F equity portfolio to SAIA.
Consequently, key money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, assembled the biggest position in Saia Inc (NASDAQ:SAIA). Driehaus Capital had $16.1 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $13.6 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Saia Inc (NASDAQ:SAIA). These stocks are Lattice Semiconductor Corporation (NASDAQ:LSCC), Tilray, Inc. (NASDAQ:TLRY), Prospect Capital Corporation (NASDAQ:PSEC), and Seritage Growth Properties (NYSE:SRG). This group of 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 |
|---|---|---|---|
| LSCC | 24 | 232643 | 4 |
| TLRY | 11 | 19410 | 0 |
| PSEC | 11 | 43044 | 0 |
| SRG | 13 | 432895 | -2 |
| Average | 14.75 | 181998 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $67 million in SAIA’s case. Lattice Semiconductor Corporation (NASDAQ:LSCC) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 11 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 1.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
