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Did Hedge Funds Make The Right Call On TreeHouse Foods Inc. (THS) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded TreeHouse Foods Inc. (NYSE:THS) and determine whether the smart money was really smart about this stock.

TreeHouse Foods Inc. (NYSE:THS) has seen an increase in enthusiasm from smart money in recent months. THS was in 28 hedge funds’ portfolios at the end of March. There were 27 hedge funds in our database with THS holdings at the end of the previous quarter. Our calculations also showed that THS 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action encompassing TreeHouse Foods Inc. (NYSE:THS).

How have hedgies been trading TreeHouse Foods Inc. (NYSE:THS)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in THS 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 THS A Good Stock To Buy?

The largest stake in TreeHouse Foods Inc. (NYSE:THS) was held by Levin Easterly Partners, which reported holding $112.2 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $18.2 million position. Other investors bullish on the company included Intrinsic Edge Capital, Ancora Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Levin Easterly Partners allocated the biggest weight to TreeHouse Foods Inc. (NYSE:THS), around 4.97% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 2.08 percent of its 13F equity portfolio to THS.

As aggregate interest increased, specific money managers were breaking ground themselves. Intrinsic Edge Capital, managed by Mark Coe, created the biggest position in TreeHouse Foods Inc. (NYSE:THS). Intrinsic Edge Capital had $15.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $4.2 million investment in the stock during the quarter. The following funds were also among the new THS investors: George McCabe’s Portolan Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TreeHouse Foods Inc. (NYSE:THS) but similarly valued. We will take a look at Halozyme Therapeutics, Inc. (NASDAQ:HALO), ChemoCentryx Inc (NASDAQ:CCXI), JetBlue Airways Corporation (NASDAQ:JBLU), and Lazard Ltd (NYSE:LAZ). This group of stocks’ market caps match THS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HALO 23 154300 -2
CCXI 30 561624 7
JBLU 36 189627 1
LAZ 15 392048 1
Average 26 324400 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $226 million in THS’s case. JetBlue Airways Corporation (NASDAQ:JBLU) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 15 bullish hedge fund positions. TreeHouse Foods Inc. (NYSE:THS) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately THS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on THS were disappointed as the stock returned -0.8% during the same time period 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.

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