Should You Avoid B&G Foods, Inc. (BGS)?

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 B&G Foods, Inc. (NYSE:BGS) and determine whether hedge funds had an edge regarding this stock.

Is B&G Foods, Inc. (NYSE:BGS) a good investment right now? Hedge funds were turning less bullish. The number of bullish hedge fund bets fell by 2 in recent months. Our calculations also showed that BGS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 shareholders, hedge funds are seen as underperforming, old investment vehicles of the past. While there are greater than 8000 funds with their doors open today, We choose to focus on the aristocrats of this group, approximately 850 funds. It is estimated that this group of investors administer most of all hedge funds’ total capital, and by observing their finest stock picks, Insider Monkey has formulated a few 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 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 PayPal alternatives for international payments to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the latest hedge fund action surrounding B&G Foods, Inc. (NYSE:BGS).

Hedge fund activity in B&G Foods, Inc. (NYSE:BGS)

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BGS over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in B&G Foods, Inc. (NYSE:BGS) was held by Diamond Hill Capital, which reported holding $18.8 million worth of stock at the end of September. It was followed by Millennium Management with a $9.8 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to B&G Foods, Inc. (NYSE:BGS), around 1.38% of its 13F portfolio. Ellington is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to BGS.

Because B&G Foods, Inc. (NYSE:BGS) has faced bearish sentiment from the smart money, we can see that there were a few fund managers that elected to cut their entire stakes in the first quarter. Intriguingly, Jack Woodruff’s Candlestick Capital Management dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $9.9 million in stock. Ken Fisher’s fund, Fisher Asset Management, also dumped its stock, about $0.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as B&G Foods, Inc. (NYSE:BGS) but similarly valued. We will take a look at Alcoa Corporation (NYSE:AA), Crocs, Inc. (NASDAQ:CROX), Great Western Bancorp Inc (NYSE:GWB), and FBL Financial Group, Inc. (NYSE:FFG). All of these stocks’ market caps are closest to BGS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AA 33 213717 3
CROX 25 302666 -11
GWB 10 12427 -7
FFG 8 15395 1
Average 19 136051 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $41 million in BGS’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 8 bullish hedge fund positions. B&G Foods, Inc. (NYSE:BGS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on BGS as the stock returned 36.2% during the second quarter and outperformed the market by an even larger margin.

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