With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Sprouts Farmers Market Inc (NASDAQ:SFM).
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s analyze the recent hedge fund action regarding Sprouts Farmers Market Inc (NASDAQ:SFM).
How have hedgies been trading Sprouts Farmers Market Inc (NASDAQ:SFM)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the second quarter of 2018. By comparison, 27 hedge funds held shares or bullish call options in SFM a year ago. 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, Renaissance Technologies was the largest shareholder of Sprouts Farmers Market Inc (NASDAQ:SFM), with a stake worth $113.3 million reported as of the end of September. Trailing Renaissance Technologies was Balyasny Asset Management, which amassed a stake valued at $38.3 million. Citadel Investment Group, Impax Asset Management, and Winton Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names have jumped into Sprouts Farmers Market Inc (NASDAQ:SFM) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Sprouts Farmers Market Inc (NASDAQ:SFM). Two Sigma Advisors had $15 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $5.8 million position during the quarter. The following funds were also among the new SFM investors: Steve Cohen’s Point72 Asset Management, Louis Bacon’s Moore Global Investments, and Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sprouts Farmers Market Inc (NASDAQ:SFM) but similarly valued. We will take a look at Intelsat S.A. (NYSE:I), NorthWestern Corporation (NYSE:NWE), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and China Biologic Products Holdings, Inc. (NASDAQ:CBPO). All of these stocks’ market caps resemble SFM’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 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $306 million in SFM’s case. Intelsat S.A. (NYSE:I) is the most popular stock in this table. On the other hand China Biologic Products Holdings, Inc. (NASDAQ:CBPO) is the least popular one with only 7 bullish hedge fund positions. Sprouts Farmers Market Inc (NASDAQ:SFM) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SFM wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SFM were disappointed as the stock returned -10.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.