Is Werner Enterprises, Inc. (WERN) Going to Burn These Hedge Funds?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Werner Enterprises, Inc. (NASDAQ:WERN) during the quarter below.

Werner Enterprises, Inc. (NASDAQ:WERN) is a $1.80 billion logistics and transportation company, whose stock has lost 21% since the beginning of the year. Therefore, it’s not surprising that the stock registered a decrease in confidence among smart money investors, which we will discuss later on in this article. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost or drop in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Shanda Games Limited(ADR) (NASDAQ:GAME), Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), and Parkway Properties Inc (NYSE:PKY) to gather more data points.

To most market participants, hedge funds are viewed as worthless, outdated financial tools of yesteryear. While there are greater than an 8000 funds in operation today, Our experts hone in on the leaders of this club, approximately 700 funds. These investment experts direct most of the smart money’s total asset base, and by watching their top investments, Insider Monkey has figured out several investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s check out the key action surrounding Werner Enterprises, Inc. (NASDAQ:WERN).

Hedge fund activity in Werner Enterprises, Inc. (NASDAQ:WERN)

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 18% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Werner Enterprises, Inc. (NASDAQ:WERN). Royce & Associates has a $36.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund is Dmitry Balyasny’s Balyasny Asset Management, with a $34.6 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish contain Cliff Asness’ AQR Capital Management, Michael O’Keefe’s 12th Street Asset Management, and Alexander Mitchell’s Scopus Asset Management.

Since Werner Enterprises, Inc. (NASDAQ:WERN) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who sold off their positions entirely heading into Q4. Intriguingly, Gregg Moskowitz’s Interval Partners dumped the biggest stake of all the hedgies watched by Insider Monkey, totaling an estimated $2.4 million in stock. Renaissance Technologies, also dumped its stock, about $1.6 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to Werner Enterprises, Inc. (NASDAQ:WERN). These stocks are Shanda Games Limited(ADR) (NASDAQ:GAME), Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), Parkway Properties Inc (NYSE:PKY), and Media General, Inc. (NYSE:MEG). This group of stocks’ market valuations are closest to WERN’s market valuation.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $123 million in WERN’s case. Media General, Inc. (NYSE:MEG) is the most popular stock in this table with a total of 25 funds reporting long positions. On the other hand the other three stocks had the same number of 7 bullish hedge fund positions. Werner Enterprises, Inc. (NASDAQ:WERN) 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 MEG might be a better candidate to consider a long position.