Hedge Funds Are Crazy About Sanderson Farms, Inc. (SAFM)

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Sanderson Farms, Inc. (NASDAQ:SAFM) based on that data.

Sanderson Farms, Inc. (NASDAQ:SAFM) investors should be aware of an increase in enthusiasm from smart money of late. Sanderson Farms, Inc. (NASDAQ:SAFM) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistic is 36. Our calculations also showed that SAFM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Matthew Halbower of Pentwater Capital

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. With all of this in mind let’s take a glance at the fresh hedge fund action surrounding Sanderson Farms, Inc. (NASDAQ:SAFM).

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

At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 83% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in SAFM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sanderson Farms, Inc. (NASDAQ:SAFM) was held by Renaissance Technologies, which reported holding $58.8 million worth of stock at the end of June. It was followed by Candlestick Capital Management with a $41.4 million position. Other investors bullish on the company included Pentwater Capital Management, Citadel Investment Group, and Empyrean Capital Partners. In terms of the portfolio weights assigned to each position Jet Capital Investors allocated the biggest weight to Sanderson Farms, Inc. (NASDAQ:SAFM), around 1.88% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, earmarking 1.63 percent of its 13F equity portfolio to SAFM.

Consequently, key hedge funds have been driving this bullishness. Candlestick Capital Management, managed by Jack Woodruff, assembled the most outsized position in Sanderson Farms, Inc. (NASDAQ:SAFM). Candlestick Capital Management had $41.4 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also made a $25.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael A. Price and Amos Meron’s Empyrean Capital Partners, Matthew Mark’s Jet Capital Investors, and Matthew Mark’s Jet Capital Investors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sanderson Farms, Inc. (NASDAQ:SAFM) but similarly valued. We will take a look at PNM Resources, Inc. (NYSE:PNM), Range Resources Corp. (NYSE:RRC), Safehold Inc. (NYSE:SAFE), Cardlytics, Inc. (NASDAQ:CDLX), HUYA Inc. (NYSE:HUYA), Grand Canyon Education Inc (NASDAQ:LOPE), and National Vision Holdings, Inc. (NASDAQ:EYE). This group of stocks’ market valuations match SAFM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $431 million. That figure was $299 million in SAFM’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sanderson Farms, Inc. (NASDAQ:SAFM) is more popular among hedge funds. Our overall hedge fund sentiment score for SAFM is 87.5. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately SAFM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SAFM were disappointed as the stock returned -0.2% since the end of the second quarter (through 10/15) 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 most of these stocks already outperformed the market since 2019.

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