Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like AdvancePierre Foods Holdings Inc (NYSE:APFH).
Is AdvancePierre Foods Holdings Inc (NYSE:APFH) a buy, sell, or hold? The stock went public in mid-July and by the end of the third quarter, it managed to capture the attention of 10 funds tracked by Insider Monkey. 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 Tri Pointe Homes Inc (NYSE:TPH), Steven Madden, Ltd. (NASDAQ:SHOO), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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How are hedge funds trading AdvancePierre Foods Holdings Inc (NYSE:APFH)?
As stated earlier, heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock. So, let’s check out which hedge funds were among the top holders of the stock at the end of September.
According to Insider Monkey’s hedge fund database, Oaktree Capital Management, led by Howard Marks, holds the biggest position in AdvancePierre Foods Holdings Inc (NYSE:APFH). Oaktree Capital Management has a $1.19 billion position in the stock, comprising 15.5% of its 13F portfolio. On Oaktree Capital Management’s heels is Newbrook Capital Advisors, led by Robert Boucai, which holds a $48.2 million position; 4.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Steve Cohen’s Point72 Asset Management and Brian Taylor’s Pine River Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
On the next page, we’ll compare the sentiment surrounding AdvancePierre Foods Holdings Inc with the same metric registered by other stocks with similar market values.
Let’s check out hedge fund activity in other stocks similar to AdvancePierre Foods Holdings Inc (NYSE:APFH). We will take a look at Tri Pointe Homes Inc (NYSE:TPH), Steven Madden, Ltd. (NASDAQ:SHOO), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and SouFun Holdings Limited (ADR) (NYSE:SFUN). This group of stocks’ market values resemble APFH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPH | 25 | 242290 | 3 |
| SHOO | 4 | 25248 | -7 |
| CCO | 16 | 73696 | 1 |
| SFUN | 11 | 79709 | -1 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $1312 million in APFH’s case. Tri Pointe Homes Inc (NYSE:TPH) is the most popular stock in this table. On the other hand Steven Madden, Ltd. (NASDAQ:SHOO) is the least popular one with only 4 bullish hedge fund positions. AdvancePierre Foods Holdings Inc (NYSE:APFH) 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 TPH might be a better candidate to consider taking a long position in.
Disclosure: None