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Hedge Funds Are Betting On Post Holdings Inc (POST)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Post Holdings Inc (NYSE:POST) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is Post Holdings Inc (NYSE:POST) a buy, sell, or hold? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets inched up by 3 lately. Post Holdings Inc (NYSE:POST) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 44. Our calculations also showed that POST isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are over 8000 funds trading at the moment, Our experts hone in on the leaders of this group, about 850 funds. These investment experts handle most of the smart money’s total asset base, and by shadowing their matchless stock picks, Insider Monkey has determined numerous investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

BRIDGER MANAGEMENT

Roberto Mignone of Bridger Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a peek at the new hedge fund action surrounding Post Holdings Inc (NYSE:POST).

What have hedge funds been doing with Post Holdings Inc (NYSE:POST)?

At second quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in POST 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.

Among these funds, Route One Investment Company held the most valuable stake in Post Holdings Inc (NYSE:POST), which was worth $613.4 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $198 million worth of shares. Diamond Hill Capital, Bridger Management, and Candlestick Capital Management 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 Route One Investment Company allocated the biggest weight to Post Holdings Inc (NYSE:POST), around 17.5% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, earmarking 7.1 percent of its 13F equity portfolio to POST.

Now, some big names were leading the bulls’ herd. Kehrs Ridge Capital, managed by Brian Scudieri, assembled the most outsized position in Post Holdings Inc (NYSE:POST). Kehrs Ridge Capital had $7.2 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $2 million position during the quarter. The following funds were also among the new POST investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s go over hedge fund activity in other stocks similar to Post Holdings Inc (NYSE:POST). We will take a look at Five Below Inc (NASDAQ:FIVE), NovoCure Limited (NASDAQ:NVCR), Enphase Energy Inc (NASDAQ:ENPH), Tandem Diabetes Care Inc (NASDAQ:TNDM), Allogene Therapeutics, Inc. (NASDAQ:ALLO), Globant SA (NYSE:GLOB), and Huaneng Power International Inc (NYSE:HNP). All of these stocks’ market caps are similar to POST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FIVE 42 988706 11
NVCR 27 384434 0
ENPH 40 716678 5
TNDM 32 401577 4
ALLO 24 329892 12
GLOB 17 235992 0
HNP 2 2391 -1
Average 26.3 437096 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $437 million. That figure was $1240 million in POST’s case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 bullish hedge fund positions. Post Holdings Inc (NYSE:POST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for POST is 71.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately POST wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on POST were disappointed as the stock returned 0.5% 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.