“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Nomad Foods Limited (NYSE:NOMD) in order to identify whether reputable and successful top money managers continue to believe in its potential. In this article we will also compare Nomad’s popularity to similarly valued stocks like FTI Consulting, Inc. (NYSE:FCN), IBERIABANK Corporation (NASDAQ:IBKC), Outfront Media Inc (NYSE:OUT), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD).
Is Nomad Foods Limited (NYSE:NOMD) worth your attention right now? Hedge funds are in an optimistic mood. The number of long hedge fund bets increased by 5 recently. Our calculations also showed that NOMD 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
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 review the new hedge fund action surrounding Nomad Foods Limited (NYSE:NOMD).
What have hedge funds been doing with Nomad Foods Limited (NYSE:NOMD)?
Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NOMD over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Samlyn Capital was the largest shareholder of Nomad Foods Limited (NYSE:NOMD), with a stake worth $79 million reported as of the end of September. Trailing Samlyn Capital was Citadel Investment Group, which amassed a stake valued at $54.4 million. Woodson Capital Management, D E Shaw, and BlueDrive Global Investors 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 HPS Investment Partners allocated the biggest weight to Nomad Foods Limited (NYSE:NOMD), around 47.85% of its portfolio. Sheffield Asset Management is also relatively very bullish on the stock, earmarking 10.03 percent of its 13F equity portfolio to NOMD.
As aggregate interest increased, key hedge funds have been driving this bullishness. HPS Investment Partners, managed by Scott Kapnick, established the most outsized position in Nomad Foods Limited (NYSE:NOMD). HPS Investment Partners had $19.1 million invested in the company at the end of the quarter. Curtis Schenker and Craig Effron’s Scoggin also made a $8.2 million investment in the stock during the quarter. The other funds with brand new NOMD positions are Dmitry Balyasny’s Balyasny Asset Management, Bart Baum’s Ionic Capital Management, and Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Nomad Foods Limited (NYSE:NOMD) but similarly valued. We will take a look at FTI Consulting, Inc. (NYSE:FCN), IBERIABANK Corporation (NASDAQ:IBKC), Outfront Media Inc (NYSE:OUT), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). This group of stocks’ market caps resemble NOMD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCN | 18 | 138946 | 1 |
| IBKC | 19 | 163668 | -6 |
| OUT | 29 | 478492 | 7 |
| AJRD | 21 | 465161 | 3 |
| Average | 21.75 | 311567 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $487 million in NOMD’s case. Outfront Media Inc (NYSE:OUT) is the most popular stock in this table. On the other hand FTI Consulting, Inc. (NYSE:FCN) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Nomad Foods Limited (NYSE:NOMD) is more popular among hedge funds. 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 NOMD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NOMD were disappointed as the stock returned 2.4% 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.
