At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).
Is JBSS a good stock to buy now? Hedge fund interest in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JBSS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare JBSS to other stocks including The RMR Group Inc. (NASDAQ:RMR), Ladder Capital Corp (NYSE:LADR), and Forestar Group Inc. (NYSE:FOR) to get a better sense of its popularity.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the latest hedge fund action surrounding John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).
Do Hedge Funds Think JBSS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JBSS over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), with a stake worth $37.3 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $12.2 million. AQR Capital Management, Winton Capital Management, and Millennium 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 Royce & Associates allocated the biggest weight to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), around 0.4% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to JBSS.
Judging by the fact that John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) has witnessed falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds who sold off their positions entirely last quarter. At the top of the heap, Bruce Kovner’s Caxton Associates LP dumped the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $0.3 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). These stocks are The RMR Group Inc. (NASDAQ:RMR), Ladder Capital Corp (NYSE:LADR), Forestar Group Inc. (NYSE:FOR), Arcos Dorados Holdings Inc. (NYSE:ARCO), NextGen Healthcare, Inc. (NASDAQ:NXGN), Tompkins Financial Corporation (NYSE:TMP), and Kaiser Aluminum Corp. (NASDAQ:KALU). This group of stocks’ market valuations are similar to JBSS’s market valuation.
|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 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $67 million in JBSS’s case. NextGen Healthcare, Inc. (NASDAQ:NXGN) is the most popular stock in this table. On the other hand Tompkins Financial Corporation (NYSE:TMP) is the least popular one with only 7 bullish hedge fund positions. John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JBSS is 68.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately JBSS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JBSS were disappointed as the stock returned 1.4% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.