Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Cal-Maine Foods Inc (NASDAQ:CALM) changed during the first quarter.
Is Cal-Maine Foods Inc (NASDAQ:CALM) worth your attention right now? Prominent investors are getting more optimistic. The number of long hedge fund positions rose by 4 in recent months. Our calculations also showed that CALM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CALM was in 20 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with CALM positions 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.
Philippe Laffont of Coatue Management
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 check out the latest hedge fund action regarding Cal-Maine Foods Inc (NASDAQ:CALM).
How are hedge funds trading Cal-Maine Foods Inc (NASDAQ:CALM)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in CALM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the most valuable position in Cal-Maine Foods Inc (NASDAQ:CALM). Diamond Hill Capital has a $82.8 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $51.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Chuck Royce’s Royce & Associates, George Baxter’s Sabrepoint Capital and Eric Sprott’s Sprott Asset Management. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Cal-Maine Foods Inc (NASDAQ:CALM), around 3.92% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 1.06 percent of its 13F equity portfolio to CALM.
As industrywide interest jumped, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the largest position in Cal-Maine Foods Inc (NASDAQ:CALM). Millennium Management had $0.7 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $0.7 million position during the quarter. The other funds with brand new CALM positions are Michael Gelband’s ExodusPoint Capital, Steve Cohen’s Point72 Asset Management, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cal-Maine Foods Inc (NASDAQ:CALM) but similarly valued. These stocks are Avon Products, Inc. (NYSE:AVP), Cleveland-Cliffs Inc (NYSE:CLF), PennyMac Mortgage Investment Trust (NYSE:PMT), and Banner Corporation (NASDAQ:BANR). This group of stocks’ market valuations match CALM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVP | 21 | 314685 | 3 |
| CLF | 26 | 297021 | -2 |
| PMT | 13 | 74959 | -1 |
| BANR | 13 | 78632 | -3 |
| Average | 18.25 | 191324 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $185 million in CALM’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand PennyMac Mortgage Investment Trust (NYSE:PMT) is the least popular one with only 13 bullish hedge fund positions. Cal-Maine Foods Inc (NASDAQ:CALM) 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 CALM, though not to the same extent, as the stock returned 8.9% 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.
