Sanderson Farms, Inc. (NASDAQ:SAFM)’s stock is on the move today after it posted second quarter EPS of $2.11, dwarfing the estimates of $1.62. Revenue for the quarter came in at $692.1, better than the expected $671.61 million. Joe F. Sanderson, Jr., Chairman and CEO of the Mississippi based poultry processing company, said that lower grain costs, increasing demand of poultry products at grocery stores, higher volume, and an improving export environment gave a boost to the company in the quarter. He said that the company is constructing a new hatchery, processing plant and waste water treatment facility in St. Pauls, North Carolina, which will be operational till the first fiscal quarter of 2017.
Sanderson Farms, Inc. (NASDAQ:SAFM) investors should pay attention to an increase in enthusiasm from smart money in recent months. SAFM was in 15 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with SAFM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as DiamondRock Hospitality Company (NYSE:DRH), CBL & Associates Properties, Inc. (NYSE:CBL), and United Natural Foods, Inc. (NASDAQ:UNFI) to gather more data points.
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In the eyes of most market participants, hedge funds are assumed to be slow, outdated investment tools of years past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the masters of this club, around 700 funds. Most estimates calculate that this group of people preside over bulk of the smart money’s total capital, and by watching their inimitable picks, Insider Monkey has unsheathed several investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Sanderson Farms, Inc. (NASDAQ:SAFM), worth close to $33 million, corresponding to 0.1% of its total 13F portfolio. On Arrowstreet Capital’s heels is Blue Mountain Capital, led by Andrew Feldstein and Stephen Siderow, holding a $32.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Jim Simons’s Renaissance Technologies and David E. Shaw’s D E Shaw.
On the next page, we are going to look at some investors that added Sanderson Farms to their equity portfolios during the first three months of 2016.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Sanderson Farms, Inc. (NASDAQ:SAFM). Point72 Asset Management had $5.4 million invested in the company at the end of the first quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $1.4 million investment in the stock during the quarter. The other funds with brand new SAFM positions are Paul Tudor Jones’s Tudor Investment Corp, Paul Tudor Jones’s Tudor Investment Corp, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Sanderson Farms, Inc. (NASDAQ:SAFM). We will take a look at DiamondRock Hospitality Company (NYSE:DRH), CBL & Associates Properties, Inc. (NYSE:CBL), United Natural Foods, Inc. (NASDAQ:UNFI), and Superior Energy Services, Inc. (NYSE:SPN). This group of stocks’ market caps are similar to SAFM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRH | 12 | 40875 | -7 |
| CBL | 16 | 91199 | -2 |
| UNFI | 24 | 232868 | 3 |
| SPN | 26 | 239163 | 5 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $177 million in SAFM’s case. Superior Energy Services, Inc. (NYSE:SPN) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 12 bullish hedge fund positions. Sanderson Farms, Inc. (NASDAQ:SAFM) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SPN might be a better candidate to consider a long position.
Disclosure: None
