Is B&G Foods, Inc. (BGS) Going to Burn These Hedge Funds?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in B&G Foods, Inc. (NYSE:BGS) .

Is B&G Foods, Inc. (NYSE:BGS) an outstanding investment today? The best stock pickers are unambiguously buying. The number of long hedge fund bets increased by 4 in recent months. BGS was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. There were 15 hedge funds in our database with BGS holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PS Business Parks Inc (NYSE:PSB), National Health Investors Inc (NYSE:NHI), and Fresh Del Monte Produce Inc (NYSE:FDP) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What have hedge funds been doing with B&G Foods, Inc. (NYSE:BGS)?

Heading into the fourth quarter of 2016, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 27% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in BGS heading into this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

HedgeFundSentimentChart

When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital holds the largest position in B&G Foods, Inc. (NYSE:BGS). Diamond Hill Capital has a $110.8 million position in the stock. The second largest stake is held by Israel Englander’s Millennium Management which holds a $26.2 million position. Other peers with similar optimism encompass Dmitry Balyasny’s Balyasny Asset Management and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, key hedge funds have been driving this bullishness. Gotham Asset Management assembled the most valuable position in B&G Foods, Inc. (NYSE:BGS) which had $17.5 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $11.1 million investment in the stock during the quarter. The other funds with brand new BGS positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Charles Clough’s Clough Capital Partners, and Ken Griffin’s Citadel Investment Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as B&G Foods, Inc. (NYSE:BGS) but similarly valued. We will take a look at PS Business Parks Inc (NYSE:PSB), National Health Investors Inc (NYSE:NHI), Fresh Del Monte Produce Inc (NYSE:FDP), and Worthington Industries, Inc. (NYSE:WOR). This group of stocks’ market valuations are closest to BGS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSB 7 90394 0
NHI 10 68873 0
FDP 18 124840 0
WOR 16 152481 -2

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $259 million in BGS’s case. Fresh Del Monte Produce Inc (NYSE:FDP) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks B&G Foods, Inc. (NYSE:BGS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None