Were Hedge Funds Right About Rush Enterprises, Inc. (RUSHA)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Rush Enterprises, Inc. (NASDAQ:RUSHA) based on that data.

Rush Enterprises, Inc. (NASDAQ:RUSHA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that RUSHA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare RUSHA to other stocks including Harmony Gold Mining Company Limited (NYSE:HMY), Evertec Inc (NYSE:EVTC), and The Cheesecake Factory Incorporated (NASDAQ:CAKE) to get a better sense of its popularity.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Algert of Algert Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now let’s go over the latest hedge fund action regarding Rush Enterprises, Inc. (NASDAQ:RUSHA).

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

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in RUSHA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Rush Enterprises, Inc. (NASDAQ:RUSHA) was held by Renaissance Technologies, which reported holding $24.3 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $20.8 million position. Other investors bullish on the company included First Pacific Advisors LLC, AQR Capital Management, and 12th Street Asset Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Rush Enterprises, Inc. (NASDAQ:RUSHA), around 2.11% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, setting aside 1.04 percent of its 13F equity portfolio to RUSHA.

Judging by the fact that Rush Enterprises, Inc. (NASDAQ:RUSHA) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of hedgies who were dropping their full holdings by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management cut the largest investment of the 750 funds tracked by Insider Monkey, worth close to $3.9 million in stock, and Valerie Malter’s Matarin Capital was right behind this move, as the fund sold off about $2.9 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rush Enterprises, Inc. (NASDAQ:RUSHA) but similarly valued. We will take a look at Harmony Gold Mining Company Limited (NYSE:HMY), Evertec Inc (NYSE:EVTC), The Cheesecake Factory Incorporated (NASDAQ:CAKE), Range Resources Corp. (NYSE:RRC), Allegheny Technologies Incorporated (NYSE:ATI), SPX FLOW, Inc. (NYSE:FLOW), and Broadstone Net Lease, Inc. (NYSE:BNL). This group of stocks’ market caps are closest to RUSHA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $78 million in RUSHA’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Harmony Gold Mining Company Limited (NYSE:HMY) is the least popular one with only 8 bullish hedge fund positions. Rush Enterprises, Inc. (NASDAQ:RUSHA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RUSHA is 51.3. 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 positive signal but 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately RUSHA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RUSHA were disappointed as the stock returned -5.7% since the end of March (through 7/23) 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 many of these stocks already outperformed the market since 2019.

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