In this article we will check out the progression of hedge fund sentiment towards Werner Enterprises, Inc. (NASDAQ:WERN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Werner Enterprises, Inc. (NASDAQ:WERN) a buy right now? The best stock pickers were taking a pessimistic view. The number of long hedge fund positions dropped by 3 in recent months. Werner Enterprises, Inc. (NASDAQ:WERN) was in 21 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that WERN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with WERN holdings at the end of December.
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.
Joel Greenblatt Gotham Asset Management
Joel Greenblatt of Gotham Asset Management
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 let's view the latest hedge fund action surrounding Werner Enterprises, Inc. (NASDAQ:WERN).
Do Hedge Funds Think WERN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in WERN a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is WERN A Good Stock To Buy?
More specifically, AQR Capital Management was the largest shareholder of Werner Enterprises, Inc. (NASDAQ:WERN), with a stake worth $51.5 million reported as of the end of March. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $43.9 million. D E Shaw, Royce & Associates, and Citadel Investment Group 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 12th Street Asset Management allocated the biggest weight to Werner Enterprises, Inc. (NASDAQ:WERN), around 2.14% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, designating 1.52 percent of its 13F equity portfolio to WERN.
Due to the fact that Werner Enterprises, Inc. (NASDAQ:WERN) has experienced bearish sentiment from hedge fund managers, logic holds that there is a sect of hedgies who sold off their positions entirely heading into Q2. It's worth mentioning that Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $15.4 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $4.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds heading into Q2.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Werner Enterprises, Inc. (NASDAQ:WERN) but similarly valued. We will take a look at Simmons First National Corporation (NASDAQ:SFNC), Hilton Grand Vacations Inc. (NYSE:HGV), Old National Bancorp (NYSE:ONB), Root, Inc. (NASDAQ:ROOT), Insperity Inc (NYSE:NSP), Colony Capital Inc (NYSE:CLNY), and Pebblebrook Hotel Trust (NYSE:PEB). All of these stocks' market caps match WERN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFNC,12,22164,6 HGV,34,783198,3 ONB,17,50718,6 ROOT,18,346606,-7 NSP,20,226976,-5 CLNY,25,592790,4 PEB,10,48298,-6 Average,19.4,295821,0.1 [/table]
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $214 million in WERN's case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 10 bullish hedge fund positions. Werner Enterprises, Inc. (NASDAQ:WERN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WERN is 44.6. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately WERN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on WERN were disappointed as the stock returned -4.3% 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 many of these stocks already outperformed the market since 2019.
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