Hedge Funds Are Cashing Out Of TreeHouse Foods Inc. (THS)

In this article you are going to find out whether hedge funds think TreeHouse Foods Inc. (NYSE:THS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is TreeHouse Foods Inc. (NYSE:THS) going to take off soon? Investors who are in the know were turning less bullish. The number of bullish hedge fund bets retreated by 5 in recent months. TreeHouse Foods Inc. (NYSE:THS) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 32. Our calculations also showed that THS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with THS positions at the end of the first quarter.

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now we’re going to go over the fresh hedge fund action regarding TreeHouse Foods Inc. (NYSE:THS).

Do Hedge Funds Think THS Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards THS over the last 24 quarters. So, let’s see 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?

When looking at the institutional investors followed by Insider Monkey, JANA Partners, managed by Barry Rosenstein, holds the number one position in TreeHouse Foods Inc. (NYSE:THS). JANA Partners has a $170 million position in the stock, comprising 14% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $34.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Kenneth Squire’s 13D Management. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to TreeHouse Foods Inc. (NYSE:THS), around 14.02% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 2.36 percent of its 13F equity portfolio to THS.

Seeing as TreeHouse Foods Inc. (NYSE:THS) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that elected to cut their full holdings heading into Q3. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $20.2 million in stock, and Anthony Bozza’s Lakewood Capital Management was right behind this move, as the fund dumped about $14.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

Let’s check out 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 Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Fluor Corporation (NYSE:FLR), Verra Mobility Corporation (NASDAQ:VRRM), Independent Bank Corp (NASDAQ:INDB), Sally Beauty Holdings, Inc. (NYSE:SBH), Niu Technologies (NASDAQ:NIU), and Gibraltar Industries Inc (NASDAQ:ROCK). This group of stocks’ market valuations are similar to THS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBGI 20 484932 1
FLR 22 124101 5
VRRM 22 395107 4
INDB 13 47935 2
SBH 22 143723 3
NIU 13 186938 -1
ROCK 17 82296 -3
Average 18.4 209290 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $279 million in THS’s case. Fluor Corporation (NYSE:FLR) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 13 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. Our overall hedge fund sentiment score for THS is 70.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately THS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on THS were disappointed as the stock returned -13.3% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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