We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Hostess Brands, Inc. (NASDAQ:TWNK) the right pick for your portfolio? The best stock pickers are turning bullish. The number of bullish hedge fund bets increased by 2 in recent months. Our calculations also showed that TWNK isn’t among the 30 most popular stocks among hedge funds (see the video below). TWNK was in 26 hedge funds’ portfolios at the end of the second quarter of 2019. There were 24 hedge funds in our database with TWNK 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.
To most stock holders, hedge funds are viewed as slow, old financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the elite of this group, approximately 750 funds. These hedge fund managers preside over the majority of the hedge fund industry’s total asset base, and by following their unrivaled picks, Insider Monkey has unsheathed several investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action encompassing Hostess Brands, Inc. (NASDAQ:TWNK).
How are hedge funds trading Hostess Brands, Inc. (NASDAQ:TWNK)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in TWNK a year ago. So, let’s check out 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 Hostess Brands, Inc. (NASDAQ:TWNK), with a stake worth $76.6 million reported as of the end of March. Trailing Cardinal Capital was Millennium Management, which amassed a stake valued at $65.4 million. Balyasny Asset Management, D E Shaw, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the biggest position in Hostess Brands, Inc. (NASDAQ:TWNK). Luminus Management had $8.3 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $3.1 million position during the quarter. The following funds were also among the new TWNK investors: Mike Vranos’s Ellington, Renaissance Technologies, and Philippe Laffont’s Coatue Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hostess Brands, Inc. (NASDAQ:TWNK) but similarly valued. We will take a look at First Merchants Corporation (NASDAQ:FRME), NGL Energy Partners LP (NYSE:NGL), The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), and Fabrinet (NYSE:FN). This group of stocks’ market caps match TWNK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FRME | 10 | 94703 | -3 |
| NGL | 4 | 40263 | 0 |
| NTB | 13 | 120602 | -2 |
| FN | 25 | 169778 | 5 |
| Average | 13 | 106337 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $283 million in TWNK’s case. Fabrinet (NYSE:FN) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Hostess Brands, Inc. (NASDAQ:TWNK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TWNK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TWNK were disappointed as the stock returned -3.2% during the third 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
