Did Hedge Funds Make The Right Call On J&J Snack Foods Corp. (JJSF) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards J&J Snack Foods Corp. (NASDAQ:JJSF) and determine whether hedge funds skillfully traded this stock.

J&J Snack Foods Corp. (NASDAQ:JJSF) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. JJSF investors should pay attention to an increase in hedge fund interest recently. There were 13 hedge funds in our database with JJSF positions at the end of the previous quarter. Our calculations also showed that JJSF 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.


Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a glance at the key hedge fund action surrounding J&J Snack Foods Corp. (NASDAQ:JJSF).

How are hedge funds trading J&J Snack Foods Corp. (NASDAQ:JJSF)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JJSF over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is JJSF A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of J&J Snack Foods Corp. (NASDAQ:JJSF), with a stake worth $40 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $11.7 million. Citadel Investment Group, Winton Capital Management, and GAMCO Investors 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 Algert Coldiron Investors allocated the biggest weight to J&J Snack Foods Corp. (NASDAQ:JJSF), around 0.83% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to JJSF.

As one would reasonably expect, some big names were leading the bulls’ herd. Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, established the biggest position in J&J Snack Foods Corp. (NASDAQ:JJSF). Algert Coldiron Investors had $2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.7 million position during the quarter. The other funds with brand new JJSF positions are Greg Eisner’s Engineers Gate Manager, Lee Ainslie’s Maverick Capital, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as J&J Snack Foods Corp. (NASDAQ:JJSF) but similarly valued. These stocks are Valmont Industries, Inc. (NYSE:VMI), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Kohl’s Corporation (NYSE:KSS), and UMB Financial Corporation (NASDAQ:UMBF). This group of stocks’ market caps resemble JJSF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VMI 24 218687 0
DCPH 28 603787 0
KSS 26 145325 -2
UMBF 15 46125 -4
Average 23.25 253481 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $83 million in JJSF’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand UMB Financial Corporation (NASDAQ:UMBF) is the least popular one with only 15 bullish hedge fund positions. J&J Snack Foods Corp. (NASDAQ:JJSF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately JJSF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); JJSF investors were disappointed as the stock returned 8% since Q1 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 most of these stocks already outperformed the market in 2020.

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