Do Hedge Funds Love Hostess Brands, Inc. (TWNK)?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter of 2021. One of these stocks was Hostess Brands, Inc. (NASDAQ:TWNK).

Is Hostess Brands, Inc. (NASDAQ:TWNK) worth your attention right now? Hedge funds were in a bearish mood. The number of long hedge fund bets were cut by 4 lately. Hostess Brands, Inc. (NASDAQ:TWNK) was in 28 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that TWNK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 32 hedge funds in our database with TWNK holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s go over the fresh hedge fund action encompassing Hostess Brands, Inc. (NASDAQ:TWNK).

Michael Gelband of ExodusPoint Capital

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

Heading into the fourth quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in TWNK over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Hostess Brands, Inc. (NASDAQ:TWNK) was held by Cardinal Capital, which reported holding $127.8 million worth of stock at the end of September. It was followed by GLG Partners with a $73.6 million position. Other investors bullish on the company included Millennium Management, Armistice Capital, and Aristeia Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Hostess Brands, Inc. (NASDAQ:TWNK), around 3.07% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to TWNK.

Seeing as Hostess Brands, Inc. (NASDAQ:TWNK) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of fund managers who sold off their entire stakes in the third quarter. Intriguingly, Ari Zweiman’s 683 Capital Partners said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $4.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $3.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Hostess Brands, Inc. (NASDAQ:TWNK). We will take a look at Fluor Corporation (NYSE:FLR), Brinker International, Inc. (NYSE:EAT), Verve Therapeutics Inc. (NASDAQ:VERV), State Auto Financial Corporation (NASDAQ:STFC), Nexgen Energy Ltd. (NYSE:NXE), Forward Air Corporation (NASDAQ:FWRD), and SomaLogic Inc. (NASDAQ:SLGC). This group of stocks’ market valuations are similar to TWNK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $454 million in TWNK’s case. SomaLogic Inc. (NASDAQ:SLGC) is the most popular stock in this table. On the other hand Forward Air Corporation (NASDAQ:FWRD) is the least popular one with only 15 bullish hedge fund positions. Hostess Brands, Inc. (NASDAQ:TWNK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TWNK is 53.2. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately TWNK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWNK were disappointed as the stock returned 6.5% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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