In this article we will take a look at whether hedge funds think Sprouts Farmers Market Inc (NASDAQ:SFM) 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.
Hedge fund interest in Sprouts Farmers Market Inc (NASDAQ:SFM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SFM to other stocks including Axsome Therapeutics, Inc. (NASDAQ:AXSM), MyoKardia, Inc. (NASDAQ:MYOK), and GrafTech International Ltd. (NYSE:EAF) to get a better sense of its popularity.
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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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. With all of this in mind we’re going to review the latest hedge fund action encompassing Sprouts Farmers Market Inc (NASDAQ:SFM).
How are hedge funds trading Sprouts Farmers Market Inc (NASDAQ:SFM)?
Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in SFM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Sprouts Farmers Market Inc (NASDAQ:SFM) was held by Renaissance Technologies, which reported holding $147 million worth of stock at the end of September. It was followed by D E Shaw with a $32.3 million position. Other investors bullish on the company included AQR Capital Management, Impax Asset Management, and GLG Partners. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Sprouts Farmers Market Inc (NASDAQ:SFM), around 0.39% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 0.38 percent of its 13F equity portfolio to SFM.
Because Sprouts Farmers Market Inc (NASDAQ:SFM) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedgies that elected to cut their full holdings in the first quarter. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp dropped the largest position of all the hedgies watched by Insider Monkey, valued at an estimated $3.4 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund said goodbye to about $1.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Sprouts Farmers Market Inc (NASDAQ:SFM). We will take a look at Axsome Therapeutics, Inc. (NASDAQ:AXSM), MyoKardia, Inc. (NASDAQ:MYOK), GrafTech International Ltd. (NYSE:EAF), and Allakos Inc. (NASDAQ:ALLK). This group of stocks’ market caps are closest to SFM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $312 million in SFM’s case. MyoKardia, Inc. (NASDAQ:MYOK) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 12 bullish hedge fund positions. Sprouts Farmers Market Inc (NASDAQ:SFM) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SFM as the stock returned 35.2% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.