We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Sanderson Farms, Inc. (NASDAQ:SAFM).
Is Sanderson Farms, Inc. (NASDAQ:SAFM) a superb investment right now? Prominent investors are becoming more confident. The number of long hedge fund positions rose by 3 in recent months. Our calculations also showed that SAFM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SAFM was in 23 hedge funds’ portfolios at the end of the third quarter of 2019. There were 20 hedge funds in our database with SAFM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the latest hedge fund action encompassing Sanderson Farms, Inc. (NASDAQ:SAFM).
What does smart money think about Sanderson Farms, Inc. (NASDAQ:SAFM)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the second quarter of 2019. By comparison, 15 hedge funds held shares or bullish call options in SAFM a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Sanderson Farms, Inc. (NASDAQ:SAFM), with a stake worth $143.3 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $62.9 million. D E Shaw, Highline Capital Management, and DSAM Partners 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 Highline Capital Management allocated the biggest weight to Sanderson Farms, Inc. (NASDAQ:SAFM), around 6.16% of its 13F portfolio. DSAM Partners is also relatively very bullish on the stock, designating 5.24 percent of its 13F equity portfolio to SAFM.
As one would reasonably expect, specific money managers have been driving this bullishness. Sabrepoint Capital, managed by George Baxter, assembled the most valuable position in Sanderson Farms, Inc. (NASDAQ:SAFM). Sabrepoint Capital had $7.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $4.4 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sanderson Farms, Inc. (NASDAQ:SAFM) but similarly valued. These stocks are The Goodyear Tire & Rubber Company (NASDAQ:GT), Silgan Holdings Inc. (NASDAQ:SLGN), ASGN Incorporated (NYSE:ASGN), and Corporate Office Properties Trust (NYSE:OFC). This group of stocks’ market valuations match SAFM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GT | 27 | 632153 | -3 |
| SLGN | 16 | 220385 | -2 |
| ASGN | 14 | 177280 | -7 |
| OFC | 15 | 189405 | -1 |
| Average | 18 | 304806 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $411 million in SAFM’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand ASGN Incorporated (NYSE:ASGN) is the least popular one with only 14 bullish hedge fund positions. Sanderson Farms, Inc. (NASDAQ:SAFM) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on SAFM, though not to the same extent, as the stock returned 9.4% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
