Is Freshpet Inc (FRPT) A Good Stock To Buy?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Freshpet Inc (NASDAQ:FRPT).

Freshpet Inc (NASDAQ:FRPT) was in 18 hedge funds’ portfolios at the end of September. FRPT investors should be aware of a decrease in hedge fund interest recently. There were 24 hedge funds in our database with FRPT holdings at the end of the previous quarter. Our calculations also showed that FRPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are seen as slow, old investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers hone in on the aristocrats of this group, about 750 funds. Most estimates calculate that this group of people direct the majority of the hedge fund industry’s total capital, and by following their matchless equity investments, Insider Monkey has figured out numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year 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 .

Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action encompassing Freshpet Inc (NASDAQ:FRPT).

What does smart money think about Freshpet Inc (NASDAQ:FRPT)?

Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FRPT over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Freshpet Inc (NASDAQ:FRPT) was held by Honeycomb Asset Management, which reported holding $26.5 million worth of stock at the end of September. It was followed by Rock Springs Capital Management with a $17.7 million position. Other investors bullish on the company included Millennium Management, Driehaus Capital, and Columbus Circle Investors. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Freshpet Inc (NASDAQ:FRPT), around 3.48% of its 13F portfolio. Honeycomb Asset Management is also relatively very bullish on the stock, dishing out 3.4 percent of its 13F equity portfolio to FRPT.

Due to the fact that Freshpet Inc (NASDAQ:FRPT) has faced falling interest from the smart money, logic holds that there exists a select few money managers who were dropping their full holdings in the third quarter. Interestingly, Paul Tudor Jones’s Tudor Investment Corp said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, comprising close to $1.9 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $0.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Freshpet Inc (NASDAQ:FRPT) but similarly valued. We will take a look at Forward Air Corporation (NASDAQ:FWRD), Goosehead Insurance, Inc. (NASDAQ:GSHD), Avanos Medical, Inc. (NYSE:AVNS), and Yext, Inc. (NYSE:YEXT). This group of stocks’ market valuations match FRPT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FWRD 20 133372 2
GSHD 8 35500 1
AVNS 12 69048 1
YEXT 13 98841 -8
Average 13.25 84190 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $126 million in FRPT’s case. Forward Air Corporation (NASDAQ:FWRD) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 8 bullish hedge fund positions. Freshpet Inc (NASDAQ:FRPT) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on FRPT, though not to the same extent, as the stock returned 8% during the first two months of the fourth quarter and outperformed the market as well.

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