Hedge Funds Are Selling Hostess Brands, Inc. (TWNK)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 30th, 2021. What do these smart investors think about Hostess Brands, Inc. (NASDAQ:TWNK)?

Hostess Brands, Inc. (NASDAQ:TWNK) investors should pay attention to a decrease in hedge fund interest of late. Hostess Brands, Inc. (NASDAQ:TWNK) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistic is 37. There were 34 hedge funds in our database with TWNK holdings at the end of March. Our calculations also showed that TWNK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of formulas shareholders use to evaluate stocks. A pair of the most underrated formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best fund managers can outperform the broader indices by a healthy margin (see the details here). 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.

Noam Gottesman of GLG 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. Now let’s take a peek at the recent hedge fund action surrounding Hostess Brands, Inc. (NASDAQ:TWNK).

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

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TWNK over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Cardinal Capital held the most valuable stake in Hostess Brands, Inc. (NASDAQ:TWNK), which was worth $120.1 million at the end of the second quarter. On the second spot was Millennium Management which amassed $62.1 million worth of shares. GLG Partners, Armistice Capital, and Scopus Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Hostess Brands, Inc. (NASDAQ:TWNK), around 2.87% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 1.26 percent of its 13F equity portfolio to TWNK.

Seeing as Hostess Brands, Inc. (NASDAQ:TWNK) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who were dropping their positions entirely by the end of the second quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling an estimated $7.2 million in stock, and Joseph Samuels’s Islet Management was right behind this move, as the fund dumped about $4 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hostess Brands, Inc. (NASDAQ:TWNK) but similarly valued. We will take a look at Virtus Investment Partners Inc (NASDAQ:VRTS), B&G Foods, Inc. (NYSE:BGS), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Realogy Holdings Corp (NYSE:RLGY), Revance Therapeutics Inc (NASDAQ:RVNC), Rush Enterprises, Inc. (NASDAQ:RUSHB), and Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY). This group of stocks’ market values are closest to TWNK’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $439 million in TWNK’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Hostess Brands, Inc. (NASDAQ:TWNK) is more popular among hedge funds. Our overall hedge fund sentiment score for TWNK is 78.9. 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on TWNK as the stock returned 12.4% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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