Hostess Brands, Inc. (TWNK): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Hostess Brands, Inc. (NASDAQ:TWNK).

Is Hostess Brands, Inc. (NASDAQ:TWNK) worth your attention right now? Investors who are in the know are taking a bullish view. The number of long hedge fund positions inched up by 5 recently. Our calculations also showed that TWNK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TWNK was in 31 hedge funds’ portfolios at the end of the third quarter of 2019. There were 26 hedge funds in our database with TWNK positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are assumed to be slow, old financial tools of years past. While there are over 8000 funds with their doors open at the moment, We hone in on the moguls of this club, approximately 750 funds. It is estimated that this group of investors handle most of the hedge fund industry’s total asset base, and by keeping track of their highest performing investments, Insider Monkey has found a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David Harding

David Harding of Winton Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Hostess Brands, Inc. (NASDAQ:TWNK).

What does smart money think about Hostess Brands, Inc. (NASDAQ:TWNK)?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in TWNK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).


More specifically, Cardinal Capital was the largest shareholder of Hostess Brands, Inc. (NASDAQ:TWNK), with a stake worth $72.8 million reported as of the end of September. Trailing Cardinal Capital was Millennium Management, which amassed a stake valued at $27.6 million. D E Shaw, Citadel Investment Group, and Balyasny Asset Management 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 Stormborn Capital Management allocated the biggest weight to Hostess Brands, Inc. (NASDAQ:TWNK), around 3.09% of its portfolio. Cardinal Capital is also relatively very bullish on the stock, earmarking 2.4 percent of its 13F equity portfolio to TWNK.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Armistice Capital, managed by Steven Boyd, established the most valuable position in Hostess Brands, Inc. (NASDAQ:TWNK). Armistice Capital had $8.1 million invested in the company at the end of the quarter. Elise Di Vincenzo Crumbine’s Stormborn Capital Management also initiated a $4.9 million position during the quarter. The following funds were also among the new TWNK investors: David Harding’s Winton Capital Management, Steve Pigott’s Fort Baker Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hostess Brands, Inc. (NASDAQ:TWNK) but similarly valued. We will take a look at BancFirst Corporation (NASDAQ:BANF), Varonis Systems Inc (NASDAQ:VRNS), BrightView Holdings, Inc. (NYSE:BV), and Healthcare Services Group, Inc. (NASDAQ:HCSG). This group of stocks’ market caps are closest to TWNK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BANF 9 46666 0
VRNS 23 409397 -1
BV 10 284642 2
HCSG 16 85990 -4
Average 14.5 206674 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $292 million in TWNK’s case. Varonis Systems Inc (NASDAQ:VRNS) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Hostess Brands, Inc. (NASDAQ:TWNK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TWNK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TWNK were disappointed as the stock returned -3.8% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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