Glenn Welling is bullish on Boulder Brands Inc (NASDAQ:BDBD), having significantly increased his investment in the company. According to a recent filing with the Securities and Exchange Commission, Welling’s fund, Engaged Capital, has boosted its stake in the company to 5.86 million shares or 9.6% of the company’s common stock. In its latest 13F filing, Engaged Capital had reported ownership of just 410,686 shares, having initiated that position during the first quarter of 2015. So, why exactly is Glenn Welling buying so much of this stock? Let’s try to find out.
First a quick word on why we track hedge fund activity. In 2014, equity hedge funds returned just 1.4%. In 2013, that figure was 11.3%, and in 2012, they returned just 4.8%. These are embarrassingly low figures compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. Does this mean that hedge fund managers are dumber than a bucket of rocks when it comes to picking stocks? The answer is definitely no. Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012, outperforming the market each year (it’s outperforming it so far in 2015 too). What’s the reason for this discrepancy you may ask? The reason is simple: size. Hedge funds have gotten so large, they have to allocate the majority of their money into large-cap liquid stocks that are more efficiently priced. They are like mutual funds now. Consider Ray Dalio’s Bridgewater Associates, the largest in the industry with about $165 billion in AUM. It can’t allocate too much money into a small-cap stock as merely obtaining 2% exposure would really move the price. In fact, Dalio can’t even obtain 2% exposure to many small-cap stocks, even if he essentially owned the entire company, as they’re simply too small (or rather, his fund is too big). This is where we come in. Our research has shown that it is actually hedge funds’ small-cap picks that are their best performing ones and we have consistently identified the best picks of the best managers, returning 123% since the launch of our small-cap strategy compared to less than 57% for the S&P 500 (see the details).
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A producer of natural and wellness food products, Boulder Brands Inc (NASDAQ:BDBD) has a market cap of $433 million and does not pay a dividend. So far this year the stock has been battered, falling by 36%. For the three months ending March 31, 2015, Boulder Brands posted revenues of $129 million and earnings per share of $0.04. Analysts expect the company to report revenues of $124 million and earnings of $0.01 per share for the second quarter, the results from which are scheduled to be released on August 6, before the market opens.
On June 10, Boulder Brands Inc (NASDAQ:BDBD) announced the departure of Chief Executive Officer and co-founder Steve Hughes, citing need for “new leadership”.
“This change, along with the evolving dynamics of our industry, gives us confidence that we are well-positioned to leverage customer and consumer desires for authentic and scalable natural brands to deliver sustainable results and generate meaningful value creation,” the company commented in its press release.
