Hedge Funds Keep Buying TreeHouse Foods Inc. (THS)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of TreeHouse Foods Inc. (NYSE:THS) based on that data and determine whether they were really smart about the stock.

TreeHouse Foods Inc. (NYSE:THS) shareholders have witnessed an increase in hedge fund interest in recent months. TreeHouse Foods Inc. (NYSE:THS) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that THS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 S&P 500 ETFs by 58 percentage points since March 2017 (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.


Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing TreeHouse Foods Inc. (NYSE:THS).

How have hedgies been trading TreeHouse Foods Inc. (NYSE:THS)?

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the first quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in THS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Levin Easterly Partners held the most valuable stake in TreeHouse Foods Inc. (NYSE:THS), which was worth $51.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $43.4 million worth of shares. Balyasny Asset Management, Millennium Management, and Citadel Investment Group 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 Levin Easterly Partners allocated the biggest weight to TreeHouse Foods Inc. (NYSE:THS), around 2.35% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to THS.

As aggregate interest increased, some big names were leading the bulls’ herd. Maverick Capital, managed by Lee Ainslie, initiated the largest position in TreeHouse Foods Inc. (NYSE:THS). Maverick Capital had $4.8 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also initiated a $2.6 million position during the quarter. The following funds were also among the new THS investors: Noam Gottesman’s GLG Partners, David Harding’s Winton Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s check out hedge fund activity in other stocks similar to TreeHouse Foods Inc. (NYSE:THS). We will take a look at Vonage Holdings Corp. (NASDAQ:VG), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), National General Holdings Corp (NASDAQ:NGHC), Shenandoah Telecommunications Company (NASDAQ:SHEN), Bank of Hawaii Corporation (NYSE:BOH), and Option Care Health, Inc. (NASDAQ:OPCH). All of these stocks’ market caps resemble THS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VG 30 257523 5
APLS 29 563976 -1
CSOD 31 565272 7
NGHC 17 241316 -1
SHEN 8 90518 -3
BOH 18 75639 1
OPCH 11 25219 4
Average 20.6 259923 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $223 million in THS’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks TreeHouse Foods Inc. (NYSE:THS) is more popular among hedge funds. Our overall hedge fund sentiment score for THS is 89. 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. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Unfortunately THS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on THS were disappointed as the stock returned -7.6% since the end of the second quarter 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.