We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Knight-Swift Transportation Holdings Inc. (NYSE:KNX).
Is Knight-Swift Transportation Holdings Inc. (NYSE:KNX) ready to rally soon? Prominent investors were turning bullish. The number of long hedge fund positions inched up by 7 lately. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KNX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 32 hedge funds in our database with KNX holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Robert Atchinson of Adage Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s analyze the latest hedge fund action regarding Knight-Swift Transportation Holdings Inc. (NYSE:KNX).
Hedge fund activity in Knight-Swift Transportation Holdings Inc. (NYSE:KNX)
At second quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KNX over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Knight-Swift Transportation Holdings Inc. (NYSE:KNX) was held by Citadel Investment Group, which reported holding $58.4 million worth of stock at the end of June. It was followed by Adage Capital Management with a $57.4 million position. Other investors bullish on the company included Alyeska Investment Group, Impala Asset Management, and Columbus Circle Investors. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to Knight-Swift Transportation Holdings Inc. (NYSE:KNX), around 3.39% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, setting aside 2.88 percent of its 13F equity portfolio to KNX.
As one would reasonably expect, some big names were breaking ground themselves. Columbus Circle Investors, managed by Principal Global Investors, established the most valuable position in Knight-Swift Transportation Holdings Inc. (NYSE:KNX). Columbus Circle Investors had $29.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $16.5 million investment in the stock during the quarter. The following funds were also among the new KNX investors: Ryan Caldwell’s Chiron Investment Management, Michael Cowley’s Sandbar Asset Management, and Ira Unschuld’s Brant Point Investment Management.
Let’s go over hedge fund activity in other stocks similar to Knight-Swift Transportation Holdings Inc. (NYSE:KNX). These stocks are Bright Horizons Family Solutions Inc (NYSE:BFAM), Huntington Ingalls Industries Inc (NYSE:HII), Universal Display Corporation (NASDAQ:OLED), XPO Logistics Inc (NYSE:XPO), News Corp (NASDAQ:NWS), The New York Times Company (NYSE:NYT), and Aspen Technology, Inc. (NASDAQ:AZPN). All of these stocks’ market caps are similar to KNX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BFAM | 30 | 217350 | 3 |
| HII | 30 | 272167 | 9 |
| OLED | 25 | 216895 | 1 |
| XPO | 40 | 2294370 | 4 |
| NWS | 16 | 32230 | 3 |
| NYT | 42 | 1853275 | 9 |
| AZPN | 28 | 878045 | 8 |
| Average | 30.1 | 823476 | 5.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $823 million. That figure was $466 million in KNX’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 16 bullish hedge fund positions. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KNX is 84.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately KNX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KNX were disappointed as the stock returned -8.8% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Knight-Swift Transportation Holdings Inc. (NYSE:KNX)
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Disclosure: None. This article was originally published at Insider Monkey.
