Is Heartland Express, Inc. (HTLD) A Good Stock To Buy?

Reymerlyn Martin

Updated Sat, Dec 22, 2018, 9:44 PM

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Heartland Express, Inc. (NASDAQ:HTLD).

Heartland Express, Inc. (NASDAQ:HTLD) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that HTLD isn't among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

We're going to take a peek at the new hedge fund action regarding Heartland Express, Inc. (NASDAQ:HTLD).

How have hedgies been trading Heartland Express, Inc. (NASDAQ:HTLD)?

At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HTLD over the last 13 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Heartland Express, Inc. (NASDAQ:HTLD) was held by Millennium Management, which reported holding $8.4 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $4.7 million position. Other investors bullish on the company included Two Sigma Advisors, Gotham Asset Management, and Holocene Advisors.

Due to the fact that Heartland Express, Inc. (NASDAQ:HTLD) has witnessed bearish sentiment from hedge fund managers, we can see that there were a few money managers that slashed their full holdings in the third quarter. Interestingly, Jim Simons's Renaissance Technologies said goodbye to the biggest stake of the 700 funds tracked by Insider Monkey, worth about $3.4 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund said goodbye to about $2.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to Heartland Express, Inc. (NASDAQ:HTLD). These stocks are Imperva Inc (NASDAQ:IMPV), LivePerson, Inc. (NASDAQ:LPSN), Meritage Homes Corp (NYSE:MTH), and Papa John's International, Inc. (NASDAQ:PZZA). All of these stocks' market caps are closest to HTLD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMPV,29,479072,-1 LPSN,12,128677,-5 MTH,13,223910,-3 PZZA,27,358846,8 Average,20.25,297626,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $20 million in HTLD's case. Imperva Inc (NASDAQ:IMPV) is the most popular stock in this table. On the other hand LivePerson, Inc. (NASDAQ:LPSN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Heartland Express, Inc. (NASDAQ:HTLD) is even less popular than LPSN. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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