Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards B&G Foods, Inc. (NYSE:BGS).
B&G Foods, Inc. (NYSE:BGS) was in 16 hedge funds’ portfolios at the end of September. BGS has seen a decrease in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with BGS positions at the end of the previous quarter. Our calculations also showed that BGS 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.
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.
Ric Dillon of Diamond Hill Capital
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 look at the fresh hedge fund action surrounding B&G Foods, Inc. (NYSE:BGS).
What does smart money think about B&G Foods, Inc. (NYSE:BGS)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BGS over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cardinal Capital was the largest shareholder of B&G Foods, Inc. (NYSE:BGS), with a stake worth $46.7 million reported as of the end of September. Trailing Cardinal Capital was Diamond Hill Capital, which amassed a stake valued at $30.3 million. Arrowstreet Capital, Citadel Investment Group, and D E Shaw 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 B&G Foods, Inc. (NYSE:BGS), around 1.54% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.8 percent of its 13F equity portfolio to BGS.
Judging by the fact that B&G Foods, Inc. (NYSE:BGS) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies that slashed their positions entirely by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at close to $4.2 million in stock. Lee Ainslie’s fund, Maverick Capital, also cut its stock, about $3.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as B&G Foods, Inc. (NYSE:BGS) but similarly valued. These stocks are Sandy Spring Bancorp Inc. (NASDAQ:SASR), Sleep Number Corporation (NASDAQ:SNBR), Arch Coal, Inc. (NYSE:ARCH), and MSG Networks Inc (NYSE:MSGN). This group of stocks’ market caps are closest to BGS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SASR | 16 | 86930 | 1 |
| SNBR | 16 | 164083 | 0 |
| ARCH | 26 | 298997 | -1 |
| MSGN | 31 | 267648 | 8 |
| Average | 22.25 | 204415 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $134 million in BGS’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Sandy Spring Bancorp Inc. (NASDAQ:SASR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks B&G Foods, Inc. (NYSE:BGS) is even less popular than SASR. Hedge funds dodged a bullet by taking a bearish stance towards BGS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BGS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BGS investors were disappointed as the stock returned -12.4% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
