There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Student Transportation Inc (NASDAQ:STB).
Is Student Transportation Inc (NASDAQ:STB) the right pick for your portfolio? Prominent investors are surely taking a bullish view. The number of long hedge fund bets that are revealed through the 13F filings grew by 2 in recent months. There were 6 hedge funds in our database with STB positions at the end of the third quarter. At the end of this article we will also compare STB to other stocks including First Trust High Income Long/short Fund (NYSE:FSD), Rudolph Technologies Inc (NYSE:RTEC), and Unitil Corporation (NYSE:UTL) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, let’s check out the recent action encompassing Student Transportation Inc (NASDAQ:STB).
How are hedge funds trading Student Transportation Inc (NASDAQ:STB)?
Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 50% from the second quarter of 2016. On the other hand, there were a total of 3 hedge funds with a bullish position in STB at the beginning of this year. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the number one position in Student Transportation Inc (NASDAQ:STB), worth close to $7.1 million, comprising less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, led by John Overdeck and David Siegel, which holds a $0.8 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Israel Englander’s Millennium Management, Richard Driehaus’ Driehaus Capital and Charles Paquelet’s Skylands Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, key hedge funds were leading the bulls’ herd. Driehaus Capital initiated the largest position in Student Transportation Inc (NASDAQ:STB). According to regulatory filings, the fund had $0.6 million invested in the company at the end of the quarter. Skylands Capital also initiated a $0.3 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Student Transportation Inc (NASDAQ:STB) but similarly valued. These stocks are First Trust High Income Long/short Fund (NYSE:FSD), Rudolph Technologies Inc (NYSE:RTEC), Unitil Corporation (NYSE:UTL), and Dynagas LNG Partners LP (NYSE:DLNG). All of these stocks’ market caps are closest to STB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSD | 3 | 50448 | 0 |
| RTEC | 20 | 86704 | 2 |
| UTL | 7 | 30057 | -2 |
| DLNG | 4 | 4238 | 2 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $10 million in STB’s case. Rudolph Technologies Inc (NYSE:RTEC) is the most popular stock in this table. On the other hand First Trust High Income Long/short Fund (NYSE:FSD) is the least popular one with only 3 bullish hedge fund positions. Student Transportation Inc (NASDAQ:STB) 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 RTEC might be a better candidate to consider taking a long position in.
Disclosure: none.
