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Here is What Hedge Funds Think About Cal-Maine Foods Inc (CALM)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Cal-Maine Foods Inc (NASDAQ:CALM) a buy here? Prominent investors are getting less bullish. The number of bullish hedge fund bets retreated by 3 in recent months. Our calculations also showed that calm isn’t among the 30 most popular stocks among hedge funds. CALM was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 21 hedge funds in our database with CALM holdings at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

Let’s view the fresh hedge fund action surrounding Cal-Maine Foods Inc (NASDAQ:CALM).

How have hedgies been trading Cal-Maine Foods Inc (NASDAQ:CALM)?

At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CALM over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

No of Hedge Funds with CALM Positions

Among these funds, Diamond Hill Capital held the most valuable stake in Cal-Maine Foods Inc (NASDAQ:CALM), which was worth $44.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $37.2 million worth of shares. Moreover, Renaissance Technologies, GLG Partners, and D E Shaw were also bullish on Cal-Maine Foods Inc (NASDAQ:CALM), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Cal-Maine Foods Inc (NASDAQ:CALM) has witnessed falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Peter Muller’s PDT Partners dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $2.7 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also said goodbye to its stock, about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cal-Maine Foods Inc (NASDAQ:CALM) but similarly valued. These stocks are Sally Beauty Holdings, Inc. (NYSE:SBH), Inter Parfums, Inc. (NASDAQ:IPAR), Veoneer, Inc. (NYSE:VNE), and SendGrid, Inc. (NYSE:SEND). This group of stocks’ market values are closest to CALM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBH 22 168014 4
IPAR 11 70708 -2
VNE 10 183076 0
SEND 26 366686 6
Average 17.25 197121 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $163 million in CALM’s case. SendGrid, Inc. (NYSE:SEND) is the most popular stock in this table. On the other hand Veoneer, Inc. (NYSE:VNE) is the least popular one with only 10 bullish hedge fund positions. Cal-Maine Foods Inc (NASDAQ:CALM) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CALM wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CALM were disappointed as the stock returned -3.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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