The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards TreeHouse Foods Inc. (NYSE:THS), and what that likely means for the prospects of the company and its stock.
Is TreeHouse Foods Inc. (NYSE:THS) going to take off soon? Investors who are in the know are buying. The number of long hedge fund bets moved up by 1 recently. Our calculations also showed that ths isn’t among the 30 most popular stocks among hedge funds. THS was in 18 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with THS positions at the end of the previous quarter.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to review the new hedge fund action regarding TreeHouse Foods Inc. (NYSE:THS).
Hedge fund activity in TreeHouse Foods Inc. (NYSE:THS)
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in THS over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Levin Capital Strategies, managed by John A. Levin, holds the largest position in TreeHouse Foods Inc. (NYSE:THS). Levin Capital Strategies has a $155.2 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $32.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Frederick DiSanto’s Ancora Advisors.
Now, key hedge funds have jumped into TreeHouse Foods Inc. (NYSE:THS) headfirst. Harvey Partners, managed by Jeffrey Moskowitz, initiated the most valuable position in TreeHouse Foods Inc. (NYSE:THS). Harvey Partners had $1.9 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new THS investors: Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital and Mike Vranos’s Ellington.
Let’s go over 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 Triton International Limited (NYSE:TRTN), AeroVironment, Inc. (NASDAQ:AVAV), Alliance Resource Partners, L.P. (NASDAQ:ARLP), and AppFolio Inc (NASDAQ:APPF). This group of stocks’ market caps resemble THS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRTN | 12 | 60818 | -3 |
| AVAV | 13 | 53276 | 1 |
| ARLP | 9 | 84323 | 1 |
| APPF | 19 | 216393 | 2 |
| Average | 13.25 | 103703 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $258 million in THS’s case. AppFolio Inc (NASDAQ:APPF) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 9 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. In this regard APPF might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
