It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Freshpet Inc (NASDAQ:FRPT).
Freshpet Inc (NASDAQ:FRPT) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September, same as at the end of June. 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 ChemoCentryx Inc (NASDAQ:CCXI), Nutraceutical Int’l Corp. (NASDAQ:NUTR), and Control4 Corp (NASDAQ:CTRL) to gather more data points.
Follow Freshpet Inc. (NASDAQ:FRPT)
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with Freshpet Inc (NASDAQ:FRPT)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FRPT over the last 5 quarters, which has remained very stable. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steven Boyd’s Armistice Capital has the biggest position in Freshpet Inc (NASDAQ:FRPT), worth close to $8 million, comprising 2.6% of its total 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $3.6 million position. Other peers that are bullish comprise D E Shaw, one of the biggest hedge funds in the world, Joseph Mathias’ Concourse Capital Management, and Jim Simons’ Renaissance Technologies. 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-micro-cap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Freshpet Inc (NASDAQ:FRPT) but similarly valued. These stocks are ChemoCentryx Inc (NASDAQ:CCXI), Nutraceutical Int’l Corp. (NASDAQ:NUTR), Control4 Corp (NASDAQ:CTRL), and ASA Gold and Precious Metals Ltd (NYSE:ASA). This group of stocks’ market values resemble FRPT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCXI | 11 | 60448 | -1 |
| NUTR | 4 | 24796 | -1 |
| CTRL | 12 | 39487 | 2 |
| ASA | 4 | 19661 | 4 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $14 million in FRPT’s case. Control4 Corp (NASDAQ:CTRL) is the most popular stock in this table. On the other hand Nutraceutical Int’l Corp. (NASDAQ:NUTR) is the least popular one with only 4 bullish hedge fund positions. Freshpet Inc (NASDAQ:FRPT) 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 CTRL might be a better candidate to consider taking a long position in.
Disclosure: None
