The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) and find out how it is affected by hedge funds’ moves.
John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) shareholders have witnessed an increase in hedge fund sentiment lately. Our calculations also showed that JBSS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the recent hedge fund action surrounding John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).
How have hedgies been trading John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in JBSS a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), worth close to $19.4 million, accounting for 0.2% of its total 13F portfolio. On Royce & Associates’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), around 0.18% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to JBSS.
Consequently, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). Arrowstreet Capital had $4.4 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Thomas Bailard’s Bailard Inc, and David E. Shaw’s D E Shaw.
Let’s also examine hedge fund activity in other stocks similar to John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). We will take a look at Varex Imaging Corporation (NASDAQ:VREX), Wesco Aircraft Holdings Inc (NYSE:WAIR), Geopark Ltd (NYSE:GPRK), and Apollo Investment Corp. (NASDAQ:AINV). This group of stocks’ market caps match JBSS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VREX | 20 | 92701 | 0 |
| WAIR | 23 | 226099 | 2 |
| GPRK | 8 | 96471 | -2 |
| AINV | 10 | 28823 | 4 |
| Average | 15.25 | 111024 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $55 million in JBSS’s case. Wesco Aircraft Holdings Inc (NYSE:WAIR) is the most popular stock in this table. On the other hand Geopark Ltd (NYSE:GPRK) is the least popular one with only 8 bullish hedge fund positions. John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately JBSS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JBSS investors were disappointed as the stock returned 3.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
