Knight Transportation (KNX): Are Hedge Funds Right About This Stock?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Knight Transportation (NYSE:KNX) was in 19 hedge funds’ portfolios at the end of September. KNX shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 22 hedge funds in our database with KNX positions at the end of the previous quarter. At the end of this article we will also compare KNX to other stocks including The New York Times Company (NYSE:NYT), Xenia Hotels & Resorts Inc (NYSE:XHR), and Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) to get a better sense of its popularity.

Now, we’re going to go over the recent action encompassing Knight Transportation (NYSE:KNX).

Hedge fund activity in Knight Transportation (NYSE:KNX)

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the biggest position in Knight Transportation (NYSE:KNX). First Pacific Advisors LLC has a $24.3 million position in the stock, comprising 0.2% of its 13F portfolio. On First Pacific Advisors LLC’s heels is Ken Griffin of Citadel Investment Group, with a $11.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Ira Unschuld’s Brant Point Investment Management.

Judging by the fact that Knight Transportation (NYSE:KNX) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. Intriguingly, Greg Poole’s Echo Street Capital Management dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $17.7 million in stock, and Robert Bishop’s Impala Asset Management was right behind this move, as the fund dropped about $8.6 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Knight Transportation (NYSE:KNX). These stocks are The New York Times Company (NYSE:NYT), Xenia Hotels & Resorts Inc (NYSE:XHR), Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB), and Summit Materials Inc (NYSE:SUM). This group of stocks’ market values resemble KNX’s market value.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $81 million in KNX’s case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) is the least popular one with only 5 bullish hedge fund positions. Knight Transportation (NYSE:KNX) 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 SUM might be a better candidate to consider a long position.