Is USFD A Good Stock To Buy Now?

In this article we will check out the progression of hedge fund sentiment towards US Foods Holding Corp. (NYSE:USFD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is USFD a good stock to buy now? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions increased by 6 lately. US Foods Holding Corp. (NYSE:USFD) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 49. Our calculations also showed that USFD 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are viewed as worthless, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at present, Our experts hone in on the top tier of this group, around 850 funds. It is estimated that this group of investors command the lion’s share of the hedge fund industry’s total asset base, and by tracking their matchless picks, Insider Monkey has determined many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

David Brown Hawk Ridge Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to take a look at the new hedge fund action encompassing US Foods Holding Corp. (NYSE:USFD).

Do Hedge Funds Think USFD Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 46 hedge funds with a bullish position in USFD a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is USFD A Good Stock To Buy?

More specifically, Leonard Green & Partners was the largest shareholder of US Foods Holding Corp. (NYSE:USFD), with a stake worth $244.4 million reported as of the end of September. Trailing Leonard Green & Partners was Eminence Capital, which amassed a stake valued at $131.1 million. Sachem Head Capital, D E Shaw, and Hawk Ridge 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 Leonard Green & Partners allocated the biggest weight to US Foods Holding Corp. (NYSE:USFD), around 12.7% of its 13F portfolio. Clearfield Capital is also relatively very bullish on the stock, setting aside 7.79 percent of its 13F equity portfolio to USFD.

Now, key money managers have been driving this bullishness. Leonard Green & Partners, managed by Leonard Green, assembled the most valuable position in US Foods Holding Corp. (NYSE:USFD). Leonard Green & Partners had $244.4 million invested in the company at the end of the quarter. Philip Hilal’s Clearfield Capital also made a $14.9 million investment in the stock during the quarter. The other funds with brand new USFD positions are Michael Kaufman’s MAK Capital One, David Rosen’s Rubric Capital Management, and Nehal Chopra’s Ratan Capital Group.

Let’s check out hedge fund activity in other stocks similar to US Foods Holding Corp. (NYSE:USFD). We will take a look at Helen of Troy Limited (NASDAQ:HELE), Huntsman Corporation (NYSE:HUN), Q2 Holdings Inc (NYSE:QTWO), Fiverr International Ltd. (NYSE:FVRR), Kimco Realty Corp (NYSE:KIM), Berkeley Lights, Inc. (NASDAQ:BLI), and AppFolio Inc (NASDAQ:APPF). This group of stocks’ market valuations are similar to USFD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HELE 27 210119 14
HUN 24 452412 -1
QTWO 27 270014 1
FVRR 30 563661 9
KIM 22 183861 -6
BLI 10 53013 10
APPF 26 336756 5
Average 23.7 295691 4.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $770 million in USFD’s case. Fiverr International Ltd. (NYSE:FVRR) is the most popular stock in this table. On the other hand Berkeley Lights, Inc. (NASDAQ:BLI) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks US Foods Holding Corp. (NYSE:USFD) is more popular among hedge funds. Our overall hedge fund sentiment score for USFD is 85.1. 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. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on USFD as the stock returned 45.6% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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