Should I Avoid J.B. Hunt Transport Services, Inc. (JBHT)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT).

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) has seen a decrease in hedge fund interest in recent months. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that JBHT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ray Dalio of Bridgewater Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT).

Do Hedge Funds Think JBHT Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in JBHT a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Scopus Asset Management held the most valuable stake in J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), which was worth $96.1 million at the end of the fourth quarter. On the second spot was Park Presidio Capital which amassed $74 million worth of shares. AQR Capital Management, Holocene Advisors, and Bridgewater Associates 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 Park Presidio Capital allocated the biggest weight to J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), around 7.92% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, earmarking 2.18 percent of its 13F equity portfolio to JBHT.

Seeing as J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that slashed their entire stakes heading into Q2. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of the 750 funds watched by Insider Monkey, valued at about $76.2 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund sold off about $10.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT). We will take a look at Imperial Oil Limited (NYSE:IMO), Broadridge Financial Solutions, Inc. (NYSE:BR), Seagate Technology Holdings plc (NASDAQ:STX), CMS Energy Corporation (NYSE:CMS), Waters Corporation (NYSE:WAT), Essex Property Trust Inc (NYSE:ESS), and Warner Music Group Corp. (NASDAQ:WMG). This group of stocks’ market values resemble JBHT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $942 million. That figure was $339 million in JBHT’s case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 13 bullish hedge fund positions. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JBHT is 39.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately JBHT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); JBHT investors were disappointed as the stock returned -1.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.