Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Central Garden & Pet Co (NASDAQ:CENT) a healthy stock for your portfolio? The smart money is getting more bullish. The number of bullish hedge fund positions inched up by 4 lately. CENT was in 20 hedge funds’ portfolios at the end of the third quarter of 2015. There were 16 hedge funds in our database with CENT positions at the end of the previous quarter. At the end of this article we will also compare CENT to other stocks including Astec Industries, Inc. (NASDAQ:ASTE), DHX Media Ltd (USA) (NASDAQ:DHXM), and Relypsa Inc (NASDAQ:RLYP) to get a better sense of its popularity.
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Keeping this in mind, we’re going to view the key action regarding Central Garden & Pet Co (NASDAQ:CENT).
What have hedge funds been doing with Central Garden & Pet Co (NASDAQ:CENT)?
Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Schliemann’s Rutabaga Capital Management has the most valuable position in Central Garden & Pet Co (NASDAQ:CENT), worth close to $20.9 million, amounting to 2.6% of its total 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $19.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish include Jim Simons’ Renaissance Technologies, Peter Schliemann’s Rutabaga Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
As one would reasonably expect, key money managers have jumped into Central Garden & Pet Co (NASDAQ:CENT) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in Central Garden & Pet Co (NASDAQ:CENT). Millennium Management had $4.2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $1.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Mike Vranos’s Ellington, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to Central Garden & Pet Co (NASDAQ:CENT). We will take a look at Astec Industries, Inc. (NASDAQ:ASTE), DHX Media Ltd (USA) (NASDAQ:DHXM), Relypsa Inc (NASDAQ:RLYP), and Inter Parfums, Inc. (NASDAQ:IPAR). This group of stocks’ market valuations are similar to CENT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASTE | 12 | 85829 | -2 |
| DHXM | 5 | 140343 | -1 |
| RLYP | 25 | 311230 | -3 |
| IPAR | 6 | 19743 | -5 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $103 million in CENT’s case. Relypsa Inc (NASDAQ:RLYP) is the most popular stock in this table. On the other hand DHX Media Ltd (USA) (NASDAQ:DHXM) is the least popular one with only 5 bullish hedge fund positions. Central Garden & Pet Co (NASDAQ:CENT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RLYP might be a better candidate to consider a long position.
