Hedge Funds Are Crazy About TreeHouse Foods Inc. (THS)

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to TreeHouse Foods Inc. (NYSE:THS) changed recently.

Is TreeHouse Foods Inc. (NYSE:THS) going to take off soon? Prominent investors are in a bullish mood. The number of long hedge fund bets moved up by 2 recently. At the end of this article we will also compare THS to other stocks including Dolby Laboratories, Inc. (NYSE:DLB), Nice Systems Ltd (ADR) (NASDAQ:NICE), and Retail Properties of America Inc (NYSE:RPAI) to get a better sense of its popularity.

According to most stock holders, hedge funds are viewed as unimportant, old investment tools of the past. While there are over 8000 funds trading at the moment, Our researchers look at the moguls of this club, around 700 funds. These money managers shepherd the majority of the smart money’s total asset base, and by tracking their first-class equity investments, Insider Monkey has discovered a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the latest action encompassing TreeHouse Foods Inc. (NYSE:THS).

What does the smart money think about TreeHouse Foods Inc. (NYSE:THS)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one position in TreeHouse Foods Inc. (NYSE:THS), worth close to $85.9 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund is Eric W. Mandelblat’s Soroban Capital Partners, with a $67.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Michael A. Price and Amos Meron’s Empyrean Capital Partners, Ken Fisher’s Fisher Asset Management and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, key money managers have jumped into TreeHouse Foods Inc. (NYSE:THS) headfirst. Empyrean Capital Partners assembled the most outsized call position in TreeHouse Foods Inc. (NYSE:THS). Empyrean Capital Partners had $66.1 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $31.5 million position during the quarter. The other funds with brand new THS positions are Jeffrey Smith’s Starboard Value LP, Phill Gross and Robert Atchinson’s Adage Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

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 Dolby Laboratories, Inc. (NYSE:DLB), Nice Systems Ltd (ADR) (NASDAQ:NICE), Retail Properties of America Inc (NYSE:RPAI), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). This group of stocks’ market caps are similar to THS’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $346 million, compared to $462 million in THS’s case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand Retail Properties of America Inc (NYSE:RPAI) is the least popular one with only 17 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 ACAD might be a better candidate to consider a long position.