We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards SunOpta, Inc. (NASDAQ:STKL) and determine whether hedge funds skillfully traded this stock.
SunOpta, Inc. (NASDAQ:STKL) was in 12 hedge funds’ portfolios at the end of March. STKL investors should pay attention to a decrease in hedge fund interest recently. There were 13 hedge funds in our database with STKL holdings at the end of the previous quarter. Our calculations also showed that STKL 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action regarding SunOpta, Inc. (NASDAQ:STKL).
How have hedgies been trading SunOpta, Inc. (NASDAQ:STKL)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in STKL 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.
According to Insider Monkey’s hedge fund database, Ardsley Partners, managed by Philip Hempleman, holds the number one position in SunOpta, Inc. (NASDAQ:STKL). Ardsley Partners has a $20.8 million position in the stock, comprising 8.2% of its 13F portfolio. The second most bullish fund manager is Engaged Capital, managed by Glenn W. Welling, which holds a $15 million position; 2% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish consist of Howard Marks’s Oaktree Capital Management, Steve Cohen’s Point72 Asset Management and Leon Cooperman’s Omega Advisors. In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to SunOpta, Inc. (NASDAQ:STKL), around 8.16% of its 13F portfolio. Engaged Capital is also relatively very bullish on the stock, designating 1.97 percent of its 13F equity portfolio to STKL.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified STKL as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to SunOpta, Inc. (NASDAQ:STKL). These stocks are Nature’s Sunshine Products Inc (NASDAQ:NATR), PICO Holdings Inc (NASDAQ:PICO), Gencor Industries, Inc. (NASDAQ:GENC), and Timberland Bancorp, Inc. (NASDAQ:TSBK). This group of stocks’ market caps are closest to STKL’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 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $60 million in STKL’s case. PICO Holdings Inc (NASDAQ:PICO) is the most popular stock in this table. On the other hand Timberland Bancorp, Inc. (NASDAQ:TSBK) is the least popular one with only 3 bullish hedge fund positions. SunOpta, Inc. (NASDAQ:STKL) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on STKL as the stock returned 173.3% in Q2 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.