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Were Hedge Funds Right About John B. Sanfilippo & Son, Inc. (JBSS)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hedge fund interest in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare JBSS to other stocks including Heritage Financial Corporation (NASDAQ:HFWA), Luminex Corporation (NASDAQ:LMNX), and Odonate Therapeutics, Inc. (NASDAQ:ODT) to get a better sense of its popularity.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the recent hedge fund action encompassing John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).

What have hedge funds been doing with John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS)?

Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JBSS over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), which was worth $13.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $11.8 million worth of shares. Citadel Investment Group, Millennium Management, and Arrowstreet Capital 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 Royce & Associates allocated the biggest weight to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), around 0.12% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to JBSS.

Judging by the fact that John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Paul Tudor Jones’s Tudor Investment Corp dropped the largest investment of the 750 funds monitored by Insider Monkey, valued at about $0.5 million in stock. Thomas Bailard’s fund, Bailard Inc, also dropped its stock, about $0.2 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). We will take a look at Heritage Financial Corporation (NASDAQ:HFWA), Luminex Corporation (NASDAQ:LMNX), Odonate Therapeutics, Inc. (NASDAQ:ODT), and Lindsay Corporation (NYSE:LNN). All of these stocks’ market caps are similar to JBSS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HFWA 6 22500 -4
LMNX 17 180184 1
ODT 15 556075 1
LNN 9 202475 1
Average 11.75 240309 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $67 million in JBSS’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 6 bullish hedge fund positions. John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is not the most popular stock in this group but hedge fund interest is still above 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on JBSS, though not to the same extent, as the stock returned -9% during the first four months of 2020 (through May 1st) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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