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Should You Avoid Fresh Del Monte Produce Inc (FDP)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Fresh Del Monte Produce Inc (NYSE:FDP)?

Is Fresh Del Monte Produce Inc (NYSE:FDP) going to take off soon? The best stock pickers are taking a bearish view. The number of long hedge fund bets shrunk by 5 lately. Our calculations also showed that FDP 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the new hedge fund action surrounding Fresh Del Monte Produce Inc (NYSE:FDP).

What have hedge funds been doing with Fresh Del Monte Produce Inc (NYSE:FDP)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in FDP a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Fresh Del Monte Produce Inc (NYSE:FDP) was held by Renaissance Technologies, which reported holding $19.2 million worth of stock at the end of September. It was followed by Royce & Associates with a $5.2 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Fresh Del Monte Produce Inc (NYSE:FDP), around 0.07% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to FDP.

Due to the fact that Fresh Del Monte Produce Inc (NYSE:FDP) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds that slashed their positions entirely heading into Q4. At the top of the heap, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors cut the largest position of the 750 funds watched by Insider Monkey, comprising about $3.1 million in stock, and Ali Motamed’s Invenomic Capital Management was right behind this move, as the fund said goodbye to about $1.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Fresh Del Monte Produce Inc (NYSE:FDP) but similarly valued. We will take a look at SkyWest, Inc. (NASDAQ:SKYW), Herman Miller, Inc. (NASDAQ:MLHR), Evoqua Water Technologies Corp. (NYSE:AQUA), and TowneBank (NASDAQ:TOWN). This group of stocks’ market valuations are similar to FDP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SKYW 18 83716 3
MLHR 22 111991 -2
AQUA 28 124642 7
TOWN 4 25151 -2
Average 18 86375 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $28 million in FDP’s case. Evoqua Water Technologies Corp. (NYSE:AQUA) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 4 bullish hedge fund positions. Fresh Del Monte Produce Inc (NYSE:FDP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately FDP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FDP investors were disappointed as the stock returned -12.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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