Sprouts Farmers Market Inc (SFM): Are Hedge Funds Right About This Stock?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sprouts Farmers Market Inc (NASDAQ:SFM).

Sprouts Farmers Market Inc (NASDAQ:SFM) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Rice Energy Inc (NYSE:RICE), NCR Corporation (NYSE:NCR), and WEX Inc (NYSE:WEX) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to analyze the fresh action encompassing Sprouts Farmers Market Inc (NASDAQ:SFM).

How are hedge funds trading Sprouts Farmers Market Inc (NASDAQ:SFM)?

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Lykouretzos’s Hoplite Capital Management has the number one position in Sprouts Farmers Market Inc (NASDAQ:SFM), worth close to $23.1 million, comprising 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $22.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Jim Simons’s Renaissance Technologies, Gregory Thomas’s Carbonado Capital and Adam Weiss’s Stillwater Investment Management.

Due to the fact that Sprouts Farmers Market Inc (NASDAQ:SFM) has experienced falling interest from the smart money, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes heading into Q4. Interestingly, George Hall’s Clinton Group sold off the biggest position of the 700 funds followed by Insider Monkey, worth about $11.4 million worth of stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $9.2 million worth of options. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Sprouts Farmers Market Inc (NASDAQ:SFM). We will take a look at Rice Energy Inc (NYSE:RICE), NCR Corporation (NYSE:NCR), WEX Inc (NYSE:WEX), and Corelogic Inc (NYSE:CLGX). This group of stocks’ market caps match SFM’s market cap.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was just $140 million in SFM’s case. Rice Energy Inc (NYSE:RICE) is the most popular stock in this table. On the other hand WEX Inc (NYSE:WEX) is the least popular one with only 10 bullish hedge fund positions. Sprouts Farmers Market Inc (NASDAQ:SFM) 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 RICE might be a better candidate to consider a long position.

Disclosure: none.