The J.M. Smucker Company (SJM): Hedge Funds In Wait-and-See Mode

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The J.M. Smucker Company (NYSE:SJM) based on those filings.

Hedge fund interest in The J.M. Smucker Company (NYSE:SJM) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Tenaris S.A. (NYSE:TS), NetApp Inc. (NASDAQ:NTAP), and Molson Coors Brewing Company (NYSE:TAP) to gather more data points. Our calculations also showed that SJM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the fresh hedge fund action encompassing The J.M. Smucker Company (NYSE:SJM).

How have hedgies been trading The J.M. Smucker Company (NYSE:SJM)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in SJM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SJM Positions

More specifically, Ariel Investments was the largest shareholder of The J.M. Smucker Company (NYSE:SJM), with a stake worth $166.6 million reported as of the end of September. Trailing Ariel Investments was D E Shaw, which amassed a stake valued at $48.4 million. Polaris Capital Management, AQR Capital Management, and GLG Partners 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 Ariel Investments allocated the biggest weight to The J.M. Smucker Company (NYSE:SJM), around 2.22% of its portfolio. Polaris Capital Management is also relatively very bullish on the stock, dishing out 1.98 percent of its 13F equity portfolio to SJM.

Due to the fact that The J.M. Smucker Company (NYSE:SJM) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of fund managers that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Steven Boyd’s Armistice Capital sold off the biggest stake of the 750 funds watched by Insider Monkey, comprising about $25.8 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $6.7 million worth. These transactions are intriguing to say the least, as aggregate 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 The J.M. Smucker Company (NYSE:SJM). These stocks are Tenaris S.A. (NYSE:TS), NetApp Inc. (NASDAQ:NTAP), Molson Coors Brewing Company (NYSE:TAP), and IDEX Corporation (NYSE:IEX). All of these stocks’ market caps match SJM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TS 11 412435 -5
NTAP 24 735652 -2
TAP 23 446659 -2
IEX 19 454463 4
Average 19.25 512302 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $454 million in SJM’s case. NetApp Inc. (NASDAQ:NTAP) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks The J.M. Smucker Company (NYSE:SJM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SJM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SJM were disappointed as the stock returned -3.7% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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