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Should You Buy Shares of USANA Health Sciences, Inc. (USNA)?

At Insider Monkey we follow around 730 of the best-performing investors and even though many of them lost money in the last several months, the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

USANA Health Sciences, Inc. (NYSE:USNA) investors should pay attention to a decrease in hedge fund sentiment lately. At the end of this article we will also compare USANA Health Sciences, Inc. (NYSE:USNA) to other stocks including Shake Shack Inc (NYSE:SHAK), HB Fuller Co (NYSE:FUL), and Diamond Resorts International Inc (NYSE:DRII) to get a better sense of its popularity.

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To most market participants, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading at present, our researchers hone in on the crème de la crème of this group, around 700 funds. Most estimates calculate that this group of people manage the majority of the hedge fund industry’s total capital, and by watching their matchless investments, Insider Monkey has found various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to take a look at the recent action surrounding USANA Health Sciences, Inc. (NYSE:USNA).

Hedge fund activity in USANA Health Sciences, Inc. (NYSE:USNA)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies had the most valuable position in USANA Health Sciences, Inc. (NYSE:USNA), worth close to $112.2 million, amounting to 0.3% of its total 13F portfolio. The second most bullish hedge fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $20.3 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish comprise Israel Englander’s Millennium Management, D. E. Shaw and Cliff Asness’ AQR Capital Management.

Due to the fact that USANA Health Sciences, Inc. (NYSE:USNA) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their full holdings last quarter. It’s worth mentioning that Neil Chriss’ Hutchin Hill Capital dropped the largest stake of the 700 funds followed by Insider Monkey, worth close to $1.3 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also sold off its stock, about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to USANA Health Sciences, Inc. (NYSE:USNA). We will take a look at Shake Shack Inc (NYSE:SHAK), HB Fuller Co (NYSE:FUL), Diamond Resorts International Inc (NYSE:DRII), and Marcus & Millichap Inc (NYSE:MMI). This group of stocks’ market caps match USANA Health Sciences, Inc. (NYSE:USNA)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHAK 12 28794 4
FUL 11 100580 2
DRII 32 288556 5
MMI 14 69692 -4

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $122 million, while in USANA Health Sciences, Inc. (NYSE:USNA)’s case, hedge funds held $176 million in shares. Diamond Resorts International Inc (NYSE:DRII) is the most popular stock in this table, while USANA Health Sciences, Inc. (NYSE:USNA) 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. In this regard Diamond Resorts International Inc (NYSE:DRII) might be a better candidate to consider a long position in.

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