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Freshpet Inc (FRPT) Not Attracting Much Smart Money

Hedge fund managers like David Einhorn, Dan Loeb, and Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Freshpet Inc (NASDAQ:FRPT).

Freshpet Inc (NASDAQ:FRPT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged, with the stock being in 6 hedge funds’ portfolios at the end of the third quarter of 2015. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Guaranty Bancorp (NASDAQ:GBNK), Financial Institutions, Inc. (NASDAQ:FISI), and Dynex Capital Inc (NYSE:DX) to gather more data points.

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Today there are a lot of gauges stock traders put to use to value stocks. Some of the less known gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best money managers can outclass their index-focused peers by a healthy margin (see the details here).

Keeping this in mind, we’re going to take a look at the fresh action regarding Freshpet Inc (NASDAQ:FRPT).

Hedge fund activity in Freshpet Inc (NASDAQ:FRPT)

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or had already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Steven Boyd’s Armistice Capital has the number one position in Freshpet Inc (NASDAQ:FRPT), worth close to $11.8 million, accounting for 4% of its total 13F portfolio. Sitting in the 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $5.9 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of Eric Chen’s Antipodean Advisors, Michael Barnes and Arif Inayatullah’s Tricadia Capital Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Because Freshpet Inc (NASDAQ:FRPT) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that decided to sell off their full holdings heading into Q4. Interestingly, Clifford Fox’s Columbus Circle Investors dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $7.3 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund said goodbye to about $0.3 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Freshpet Inc (NASDAQ:FRPT) but similarly valued. We will take a look at Guaranty Bancorp (NASDAQ:GBNK), Financial Institutions, Inc. (NASDAQ:FISI), Dynex Capital Inc (NYSE:DX), and Boulevard Acquisition Corp II (NASDAQ:BLVDU). This group of stocks’ market values resemble Freshpet Inc’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GBNK 10 64543 -1
FISI 6 8866 1
DX 5 4933 1
BLVDU 18 176802 -4

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $31 million in Freshpet Inc’s case. Boulevard Acquisition Corp II (NASDAQ:BLVDU) is the most popular stock in this table. On the other hand Dynex Capital Inc (NYSE:DX) is the least popular one with only 5 bullish hedge fund positions. Freshpet Inc (NASDAQ:FRPT) 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. In this regard Boulevard Acquisition Corp II might be a better candidate to consider a long position.

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