Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: U.S. Xpress Enterprises, Inc. (NYSE:USX).
Is U.S. Xpress Enterprises, Inc. (NYSE:USX) a buy right now? Hedge funds are selling. The number of bullish hedge fund positions retreated by 5 in recent months. Our calculations also showed that USX 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s check out the recent hedge fund action regarding U.S. Xpress Enterprises, Inc. (NYSE:USX).
What have hedge funds been doing with U.S. Xpress Enterprises, Inc. (NYSE:USX)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards USX over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Zimmer Partners was the largest shareholder of U.S. Xpress Enterprises, Inc. (NYSE:USX), with a stake worth $34.8 million reported as of the end of September. Trailing Zimmer Partners was Citadel Investment Group, which amassed a stake valued at $18.9 million. Empyrean Capital Partners, Gratia Capital, and Alyeska Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that U.S. Xpress Enterprises, Inc. (NYSE:USX) has faced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that elected to cut their positions entirely in the third quarter. Interestingly, Richard Driehaus’s Driehaus Capital cut the biggest stake of the 700 funds followed by Insider Monkey, worth close to $7.4 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $6.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as U.S. Xpress Enterprises, Inc. (NYSE:USX) but similarly valued. These stocks are Blue Bird Corporation (NASDAQ:BLBD), Pzena Investment Management Inc (NYSE:PZN), Timkensteel Corp (NYSE:TMST), and Wstrn Ast Clymr Infltn Lkd Opts & Inc Fd (NYSE:WIW). This group of stocks’ market values match USX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLBD | 18 | 181715 | -2 |
| PZN | 4 | 12890 | -1 |
| TMST | 10 | 115386 | -3 |
| WIW | 3 | 2362 | 0 |
| Average | 8.75 | 78088 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $101 million in USX’s case. Blue Bird Corporation (NASDAQ:BLBD) is the most popular stock in this table. On the other hand Wstrn Ast Clymr Infltn Lkd Opts & Inc Fd (NYSE:WIW) is the least popular one with only 3 bullish hedge fund positions. U.S. Xpress Enterprises, Inc. (NYSE:USX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BLBD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
