How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) and determine whether hedge funds had an edge regarding this stock.
J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) shareholders have witnessed a decrease in hedge fund sentiment recently. JBHT was in 25 hedge funds' portfolios at the end of March. There were 28 hedge funds in our database with JBHT positions at the end of the previous quarter. Our calculations also showed that JBHT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
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 58 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we're going to take a look at the fresh hedge fund action surrounding J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT).
How are hedge funds trading J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)?
Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in JBHT a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Park Presidio Capital was the largest shareholder of J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), with a stake worth $55.3 million reported as of the end of September. Trailing Park Presidio Capital was Interval Partners, which amassed a stake valued at $51.6 million. Citadel Investment Group, Point72 Asset Management, and Two Sigma Advisors 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 Park Presidio Capital allocated the biggest weight to J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), around 6.82% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, dishing out 3.97 percent of its 13F equity portfolio to JBHT.
Since J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q4. Interestingly, Alexander Mitchell's Scopus Asset Management dropped the largest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $75.5 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $9.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT). These stocks are Live Nation Entertainment, Inc. (NYSE:LYV), Korea Electric Power Corporation (NYSE:KEP), Magna International Inc. (NYSE:MGA), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). All of these stocks' market caps resemble JBHT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LYV,46,1626857,2 KEP,7,30022,4 MGA,22,412543,-1 BAH,27,276427,-7 Average,25.5,586462,-0.5 [/table]
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $226 million in JBHT's case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 7 bullish hedge fund positions. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on JBHT as the stock returned 30.8% during the second quarter and outperformed the market by an even larger margin.
