Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Farmer Brothers Co. (NASDAQ:FARM) investors should pay attention to an increase in support from the world’s most successful money managers in recent months. FARM was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. There were 11 hedge funds in our database with FARM holdings at the end of the previous quarter. At the end of this article we will also compare FARM to other stocks including Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Seabridge Gold, Inc. (USA) (NYSE:SA), and 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) to get a better sense of its popularity.
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With all of this in mind, we’re going to take a look at the new action encompassing Farmer Brothers Co. (NASDAQ:FARM).
How are hedge funds trading Farmer Brothers Co. (NASDAQ:FARM)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in FARM over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Douglas T. Granat’s Trigran Investments has the most valuable position in Farmer Brothers Co. (NASDAQ:FARM), worth close to $32.9 million, accounting for 8.6% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $18.3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of Chuck Royce’s Royce & Associates, Peter S. Park’s Park West Asset Management and Michael Price’s MFP Investors. We should note that MFP Investors is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Driehaus Capital, led by Richard Driehaus, initiated the most valuable position in Farmer Brothers Co. (NASDAQ:FARM). Driehaus Capital had $3.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.2 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Farmer Brothers Co. (NASDAQ:FARM). We will take a look at Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Seabridge Gold, Inc. (USA) (NYSE:SA), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), and Novanta Inc (USA) (NASDAQ:NOVT). This group of stocks’ market values are similar to FARM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRGB | 11 | 40999 | -4 |
| SA | 6 | 12487 | -2 |
| FLWS | 14 | 33694 | 1 |
| NOVT | 13 | 65748 | 3 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $99 million in FARM’s case. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (USA) (NYSE:SA) is the least popular one with only 6 bullish hedge fund positions. Farmer Brothers Co. (NASDAQ:FARM) 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 FLWS might be a better candidate to consider taking a long position in.
