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Hedge Funds Are Dumping Post Holdings Inc (POST)

In this article we will check out the progression of hedge fund sentiment towards Post Holdings Inc (NYSE:POST) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Post Holdings Inc (NYSE:POST) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. POST was in 31 hedge funds’ portfolios at the end of March. There were 38 hedge funds in our database with POST positions at the end of the previous quarter. Our calculations also showed that POST isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of formulas stock traders can use to size up their holdings. A pair of the less utilized formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best money managers can outpace the broader indices by a significant amount (see the details here).

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, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the new hedge fund action regarding Post Holdings Inc (NYSE:POST).

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

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in POST over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Route One Investment Company was the largest shareholder of Post Holdings Inc (NYSE:POST), with a stake worth $567.9 million reported as of the end of September. Trailing Route One Investment Company was Iridian Asset Management, which amassed a stake valued at $194.8 million. 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 18.61% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, designating 6.43 percent of its 13F equity portfolio to POST.

Seeing as Post Holdings Inc (NYSE:POST) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that slashed their entire stakes by the end of the first quarter. At the top of the heap, Michael Doheny’s Freshford Capital Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, totaling close to $47.5 million in stock. Brian Scudieri’s fund, Kehrs Ridge Capital, also said goodbye to its stock, about $7.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Post Holdings Inc (NYSE:POST) but similarly valued. These stocks are HubSpot Inc (NYSE:HUBS), Royal Gold, Inc (NASDAQ:RGLD), AGNC Investment Corp. (NASDAQ:AGNC), and Melco Resorts & Entertainment Limited (NASDAQ:MLCO). This group of stocks’ market caps are closest to POST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUBS 27 662117 -3
RGLD 28 237256 -2
AGNC 27 302699 6
MLCO 28 482233 -7
Average 27.5 421076 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $1195 million in POST’s case. Royal Gold, Inc (NASDAQ:RGLD) is the most popular stock in this table. On the other hand HubSpot Inc (NYSE:HUBS) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Post Holdings Inc (NYSE:POST) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 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 4.9% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market in 2020.

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