Where Do Hedge Funds Stand On Central Garden & Pet Co (CENT)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Central Garden & Pet Co (NASDAQ:CENT).

Is Central Garden & Pet Co (NASDAQ:CENT) a buy here? Hedge funds were in an optimistic mood. The number of long hedge fund positions advanced by 4 lately. Central Garden & Pet Co (NASDAQ:CENT) was in 19 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. Our calculations also showed that CENT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Hintze CQS Capital

Michael Hintze of CQS Cayman LP

Now let’s take a glance at the recent hedge fund action encompassing Central Garden & Pet Co (NASDAQ:CENT).

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

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CENT over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in Central Garden & Pet Co (NASDAQ:CENT). Renaissance Technologies has a $44.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Steven Boyd of Armistice Capital, with a $35.1 million position; 1.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions include Renaissance Technologies, Robert Joseph Caruso’s Select Equity Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to Central Garden & Pet Co (NASDAQ:CENT), around 1.27% of its 13F portfolio. CQS Cayman LP is also relatively very bullish on the stock, dishing out 0.96 percent of its 13F equity portfolio to CENT.

As industrywide interest jumped, key hedge funds have jumped into Central Garden & Pet Co (NASDAQ:CENT) headfirst. CQS Cayman LP, managed by Michael Hintze, initiated the biggest position in Central Garden & Pet Co (NASDAQ:CENT). CQS Cayman LP had $7.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Mika Toikka’s AlphaCrest Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Central Garden & Pet Co (NASDAQ:CENT) but similarly valued. We will take a look at 2U Inc (NASDAQ:TWOU), Worthington Industries, Inc. (NYSE:WOR), Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX), Weingarten Realty Investors (NYSE:WRI), Kirby Corporation (NYSE:KEX), Alcoa Corporation (NYSE:AA), and Utz Brands Inc (NYSE:UTZ). This group of stocks’ market values resemble CENT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TWOU 25 214325 1
WOR 14 39005 -7
FMTX 10 926511 -1
WRI 14 121078 -5
KEX 34 423901 14
AA 33 415610 0
UTZ 15 166197 -4
Average 20.7 329518 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $144 million in CENT’s case. Kirby Corporation (NYSE:KEX) is the most popular stock in this table. On the other hand Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) is the least popular one with only 10 bullish hedge fund positions. Central Garden & Pet Co (NASDAQ:CENT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CENT is 50.6. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately CENT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CENT investors were disappointed as the stock returned -7.3% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.

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