Hedge Funds Are Coming Back To Sprouts Farmers Market Inc (SFM)

With the second-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 third quarter of 2021. One of these stocks was Sprouts Farmers Market Inc (NASDAQ:SFM).

Sprouts Farmers Market Inc (NASDAQ:SFM) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. SFM has experienced an increase in hedge fund sentiment of late. There were 21 hedge funds in our database with SFM positions at the end of the first quarter. Our calculations also showed that SFM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most traders, hedge funds are viewed as slow, old investment vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts hone in on the aristocrats of this group, around 850 funds. These investment experts control the majority of the hedge fund industry’s total capital, and by following their finest picks, Insider Monkey has found several investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Philip Hempleman of Ardsley Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to go over the latest hedge fund action encompassing Sprouts Farmers Market Inc (NASDAQ:SFM).

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

At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in SFM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sprouts Farmers Market Inc (NASDAQ:SFM) was held by Renaissance Technologies, which reported holding $142.3 million worth of stock at the end of June. It was followed by AQR Capital Management with a $29.2 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and GLG Partners. In terms of the portfolio weights assigned to each position Arjuna Capital allocated the biggest weight to Sprouts Farmers Market Inc (NASDAQ:SFM), around 0.53% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.33 percent of its 13F equity portfolio to SFM.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, created the biggest position in Sprouts Farmers Market Inc (NASDAQ:SFM). Bridgewater Associates had $4.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $2.2 million investment in the stock during the quarter. The following funds were also among the new SFM investors: Michael Gelband’s ExodusPoint Capital, Philip Hempleman’s Ardsley Partners, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s check out hedge fund activity in other stocks similar to Sprouts Farmers Market Inc (NASDAQ:SFM). These stocks are Verint Systems Inc. (NASDAQ:VRNT), NanoString Technologies Inc (NASDAQ:NSTG), Viper Energy Partners LP (NASDAQ:VNOM), Old National Bancorp (NASDAQ:ONB), Brady Corp (NYSE:BRC), South Jersey Industries Inc (NYSE:SJI), and Axonics, Inc. (NASDAQ:AXNX). This group of stocks’ market values resemble SFM’s market value.

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As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $246 million in SFM’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 12 bullish hedge fund positions. Sprouts Farmers Market Inc (NASDAQ:SFM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SFM is 70.1. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately SFM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SFM were disappointed as the stock returned -9.8% since the end of June (through 10/22) 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.