Hedge Funds Are Nibbling On The J.M. Smucker Company (SJM)

In this article we will take a look at whether hedge funds think The J.M. Smucker Company (NYSE:SJM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

The J.M. Smucker Company (NYSE:SJM) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistic is 47. SJM shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 33 hedge funds in our database with SJM holdings at the end of March. Our calculations also showed that SJM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. With all of this in mind we’re going to check out the fresh hedge fund action surrounding The J.M. Smucker Company (NYSE:SJM).

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

At the end of June, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in SJM a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is SJM A Good Stock To Buy?

The largest stake in The J.M. Smucker Company (NYSE:SJM) was held by Ariel Investments, which reported holding $174.9 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $105.3 million position. Other investors bullish on the company included AQR Capital Management, GAMCO Investors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to The J.M. Smucker Company (NYSE:SJM), around 1.64% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 1.59 percent of its 13F equity portfolio to SJM.

As one would reasonably expect, key money managers were breaking ground themselves. Arjuna Capital, managed by Farnum Brown and Adam Seitchik, assembled the largest position in The J.M. Smucker Company (NYSE:SJM). Arjuna Capital had $1.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1.4 million position during the quarter. The following funds were also among the new SJM investors: David Harding’s Winton Capital Management, Andrew Weiss’s Weiss Asset Management, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The J.M. Smucker Company (NYSE:SJM) but similarly valued. We will take a look at Continental Resources, Inc. (NYSE:CLR), Alliant Energy Corporation (NYSE:LNT), FMC Corporation (NYSE:FMC), New Oriental Education & Technology Group Inc. (NYSE:EDU), Avalara, Inc. (NYSE:AVLR), Icahn Enterprises LP (NASDAQ:IEP), and Open Text Corporation (NASDAQ:OTEX). This group of stocks’ market caps resemble SJM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLR 23 172410 0
LNT 16 70771 3
FMC 33 372160 1
EDU 39 590421 -6
AVLR 29 1031140 -12
IEP 4 13111036 0
OTEX 14 300643 -2
Average 22.6 2235512 -2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $2236 million. That figure was $581 million in SJM’s case. New Oriental Education & Technology Group Inc. (NYSE:EDU) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. The J.M. Smucker Company (NYSE:SJM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SJM 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately SJM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SJM were disappointed as the stock returned -5.5% since the end of June (through 10/11) 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.