Hedge Funds Are Buying Flowers Foods, Inc. (FLO)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Flowers Foods, Inc. (NYSE:FLO) from the perspective of those elite funds.

Flowers Foods, Inc. (NYSE:FLO) shareholders have witnessed an increase in support from the world’s most elite money managers recently. At the end of this article we will also compare FLO to other stocks, including Anacor Pharmaceuticals Inc (NASDAQ:ANAC), Teleflex Incorporated (NYSE:TFX), and Avery Dennison Corp (NYSE:AVY) to get a better sense of its popularity.

To most stock holders, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are more than 8000 funds trading at present, We choose to focus on the aristocrats of this group, around 700 funds. It is estimated that this group of investors watch over the lion’s share of the smart money’s total capital, and by tailing their highest performing picks, Insider Monkey has found various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to check out the key action surrounding Flowers Foods, Inc. (NYSE:FLO).

What have hedge funds been doing with Flowers Foods, Inc. (NYSE:FLO)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 21% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Joel Greenblatt’s Gotham Asset Management has the biggest position in Flowers Foods, Inc. (NYSE:FLO), worth close to $45.9 million, amounting to 0.4% of its total 13F portfolio. On Gotham Asset Management’s heels is GAMCO Investors, managed by Mario Gabelli, which holds a $30.6 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As aggregate interest increased, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in Flowers Foods, Inc. (NYSE:FLO). As reported in its latest 13F filing, the fund had $10 million invested in the company at the end of the quarter. Clifford Fox’s Columbus Circle Investors also initiated a $5.4 million position during the quarter. The other funds with new positions in the stock are Mariko Gordon’s Daruma Asset Management, George Hall’s Clinton Group, and Cliff Asness’s AQR Capital Management.

Let’s check out hedge fund activity in other stocks similar to Flowers Foods, Inc. (NYSE:FLO). These stocks are Anacor Pharmaceuticals Inc (NASDAQ:ANAC), Teleflex Incorporated (NYSE:TFX), Avery Dennison Corp (NYSE:AVY), and EnLink Midstream Partners LP (NYSE:ENLK). All of these stocks’ market caps are similar to FLO’s market cap.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $596 million. That figure was $222 million in FLO’s case, a disappointing number. Anacor Pharmaceuticals Inc (NASDAQ:ANAC) is the most popular stock in this table. On the other hand EnLink Midstream Partners LP (NYSE:ENLK) is the least popular one with only 6 bullish hedge fund positions. Flowers Foods, Inc. (NYSE:FLO) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ANAC might be a better candidate to consider a long position.