Were Hedge Funds Right About Sanderson Farms, Inc. (SAFM)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Sanderson Farms, Inc. (NASDAQ:SAFM).

Is Sanderson Farms, Inc. (NASDAQ:SAFM) a buy right now? Hedge funds were in a pessimistic mood. The number of long hedge fund bets shrunk by 1 lately. Sanderson Farms, Inc. (NASDAQ:SAFM) was in 18 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that SAFM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with SAFM positions at the end of the fourth quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s analyze the new hedge fund action regarding Sanderson Farms, Inc. (NASDAQ:SAFM).

Do Hedge Funds Think SAFM Is A Good Stock To Buy Now?

At first quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SAFM over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Sanderson Farms, Inc. (NASDAQ:SAFM), with a stake worth $48 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $26.5 million. Balyasny Asset Management, Citadel Investment Group, and Water Street 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 Water Street Capital allocated the biggest weight to Sanderson Farms, Inc. (NASDAQ:SAFM), around 1.66% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.47 percent of its 13F equity portfolio to SAFM.

Judging by the fact that Sanderson Farms, Inc. (NASDAQ:SAFM) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of hedge funds that decided to sell off their positions entirely in the first quarter. At the top of the heap, Michael Cowley’s Sandbar Asset Management dropped the largest investment of the 750 funds followed by Insider Monkey, totaling close to $5.2 million in stock. Richard SchimeláandáLawrence Sapanski’s fund, Cinctive Capital Management, also sold off its stock, about $3.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Sanderson Farms, Inc. (NASDAQ:SAFM). These stocks are AMN Healthcare Services Inc (NYSE:AMN), TechnipFMC plc (NYSE:FTI), Rush Street Interactive, Inc. (NYSE:RSI), LiveRamp Holdings, Inc. (NYSE:RAMP), First Majestic Silver Corp (NYSE:AG), White Mountains Insurance Group Ltd (NYSE:WTM), and Intercorp Financial Services Inc. (NYSE:IFS). All of these stocks’ market caps match SAFM’s market cap.

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 $186 million. That figure was $178 million in SAFM’s case. LiveRamp Holdings, Inc. (NYSE:RAMP) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 5 bullish hedge fund positions. Sanderson Farms, Inc. (NASDAQ:SAFM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAFM is 50. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on SAFM, though not to the same extent, as the stock returned 19% since the end of Q1 (through July 23rd) and outperformed the market.

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

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