Is Diamond Foods, Inc. (DMND) Going to Burn These Hedge Funds?

Diamond Foods, Inc. (NASDAQ:DMND) was in 11 hedge funds’ portfolio at the end of March. DMND investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 12 hedge funds in our database with DMND positions at the end of the previous quarter.

If you’d ask most investors, hedge funds are viewed as worthless, old financial vehicles of yesteryear. While there are over 8000 funds with their doors open at present, we at Insider Monkey look at the elite of this club, close to 450 funds. It is estimated that this group has its hands on the majority of all hedge funds’ total asset base, and by watching their top investments, we have spotted a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as integral, bullish insider trading sentiment is a second way to break down the investments you’re interested in. Just as you’d expect, there are plenty of motivations for a corporate insider to get rid of shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if “monkeys” know where to look (learn more here).

Consequently, let’s take a glance at the key action surrounding Diamond Foods, Inc. (NASDAQ:DMND).

What does the smart money think about Diamond Foods, Inc. (NASDAQ:DMND)?

Heading into Q2, a total of 11 of the hedge funds we track held long positions in this stock, a change of -8% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Litespeed Management, managed by Jamie Zimmerman, holds the biggest position in Diamond Foods, Inc. (NASDAQ:DMND). Litespeed Management has a $36.9 million position in the stock, comprising 7.3% of its 13F portfolio. The second largest stake is held by Michael Larson of Bill & Melinda Gates Foundation Trust, with a $7.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish include Mario Gabelli’s GAMCO Investors, Ric Dillon’s Diamond Hill Capital and Lance Helfert and Paul Orfalea’s West Coast Asset Management.

Seeing as Diamond Foods, Inc. (NASDAQ:DMND) has witnessed a declination in interest from hedge fund managers, it’s easy to see that there were a few funds who were dropping their entire stakes in Q1. Intriguingly, Phil Frohlich’s Prescott Group Capital Management said goodbye to the largest position of the “upper crust” of funds we watch, totaling about $1 million in stock.. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds in Q1.

How are insiders trading Diamond Foods, Inc. (NASDAQ:DMND)?

Bullish insider trading is best served when the company in focus has seen transactions within the past six months. Over the last 180-day time period, Diamond Foods, Inc. (NASDAQ:DMND) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Diamond Foods, Inc. (NASDAQ:DMND). These stocks are Farmer Brothers Co. (NASDAQ:FARM), Seneca Foods Corp (NASDAQ:SENEA), Seneca Foods Corp (NASDAQ:SENEB), Boulder Brands Inc (NASDAQ:BDBD), and SunOpta, Inc. (USA) (NASDAQ:STKL). This group of stocks belong to the processed & packaged goods industry and their market caps are similar to DMND’s market cap.

With the returns exhibited by Insider Monkey’s time-tested strategies, retail investors should always watch hedge fund and insider trading activity, and Diamond Foods, Inc. (NASDAQ:DMND) is no exception.

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