Should You Buy Roadrunner Transportation Systems Inc (RRTS)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Roadrunner Transportation Systems Inc (NYSE:RRTS) from the perspective of those elite funds.

Roadrunner Transportation Systems Inc (NYSE:RRTS) shareholders have witnessed an increase in support from the world’s most elite money managers lately. 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 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 Merge Healthcare Inc. (NASDAQ:MRGE), The Providence Service Corporation (NASDAQ:PRSC), and Southside Bancshares, Inc. (NASDAQ:SBSI) to gather more data points.

In the financial world, there are tons of signals that stock traders use to evaluate stocks. A pair of the most underrated signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the market by a solid amount (see the details here).

With all of this in mind, we’re going to take a glance at the latest action regarding Roadrunner Transportation Systems Inc (NYSE:RRTS).

What have hedge funds been doing with Roadrunner Transportation Systems Inc (NYSE:RRTS)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 57% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Amy Minella’s Cardinal Capital has the largest position in Roadrunner Transportation Systems Inc (NYSE:RRTS), worth close to $34.7 million, amounting to 2.2% of its total 13F portfolio. Sitting at the No. 2 spot is Brian Newman and David Heller of Cloud Gate Capital, with a $4.8 million position; 2.4% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Alexander Mitchell’s Scopus Asset Management and Israel Englander’s Millennium Management.

Consequently, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the biggest position in Roadrunner Transportation Systems Inc (NYSE:RRTS), carrying a value of $2.6 million at the end of the quarter. Ken Brodkowitz and Mike Vermut’s Newland Capital also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to Roadrunner Transportation Systems Inc (NYSE:RRTS). These stocks are Merge Healthcare Inc. (NASDAQ:MRGE), The Providence Service Corporation (NASDAQ:PRSC), Southside Bancshares, Inc. (NASDAQ:SBSI), and Dermira Inc (NASDAQ:DERM). This group of stocks’ market caps match RRTS’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was just $53 million in RRTS’s case. Dermira Inc (NASDAQ:DERM) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 8 bullish hedge fund positions. Roadrunner Transportation Systems Inc (NYSE:RRTS) 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. In this regard DERM might be a better candidate to consider a long position.