How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The J.M. Smucker Company (NYSE:SJM).
The J.M. Smucker Company (NYSE:SJM) was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. SJM has seen a decrease in support from the world’s most elite money managers of late. There were 34 hedge funds in our database with SJM holdings at the end of December. Our calculations also showed that SJM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to check out the recent hedge fund action regarding The J.M. Smucker Company (NYSE:SJM).
Do Hedge Funds Think SJM Is A Good Stock To Buy Now?
At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in SJM a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ariel Investments, managed by John W. Rogers, holds the largest position in The J.M. Smucker Company (NYSE:SJM). Ariel Investments has a $168.3 million position in the stock, comprising 1.7% of its 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $116.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to The J.M. Smucker Company (NYSE:SJM), around 1.66% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 1.55 percent of its 13F equity portfolio to SJM.
Due to the fact that The J.M. Smucker Company (NYSE:SJM) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely in the first quarter. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management dumped the largest position of the 750 funds tracked by Insider Monkey, comprising close to $4.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to The J.M. Smucker Company (NYSE:SJM). These stocks are Whirlpool Corporation (NYSE:WHR), Tata Motors Limited (NYSE:TTM), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Williams-Sonoma, Inc. (NYSE:WSM), WestRock Company (NYSE:WRK), Loews Corporation (NYSE:L), and NICE Ltd (NASDAQ:NICE). This group of stocks’ market caps resemble SJM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $714 million. That figure was $690 million in SJM’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 8 bullish hedge fund positions. The J.M. Smucker Company (NYSE:SJM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SJM is 60.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately SJM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SJM were disappointed as the stock returned 3.2% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.