While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Nomad Foods Limited (NYSE:NOMD).
Is Nomad Foods Limited (NYSE:NOMD) the right pick for your portfolio? Prominent investors are becoming less hopeful. The number of bullish hedge fund positions fell by 10 in recent months. Our calculations also showed that NOMD isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Let’s check out the key hedge fund action encompassing Nomad Foods Limited (NYSE:NOMD).
How are hedge funds trading Nomad Foods Limited (NYSE:NOMD)?
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NOMD over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Samlyn Capital held the most valuable stake in Nomad Foods Limited (NYSE:NOMD), which was worth $76.1 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $52.3 million worth of shares. Moreover, Millennium Management, BlueDrive Global Investors, and Woodson Capital Management were also bullish on Nomad Foods Limited (NYSE:NOMD), allocating a large percentage of their portfolios to this stock.
Since Nomad Foods Limited (NYSE:NOMD) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q3. Intriguingly, Benjamin A. Smith’s Laurion Capital Management sold off the biggest position of all the hedgies followed by Insider Monkey, comprising about $20 million in stock, and Joseph Samuels’s Islet Management was right behind this move, as the fund said goodbye to about $16.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 10 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to Nomad Foods Limited (NYSE:NOMD). We will take a look at Carter’s, Inc. (NYSE:CRI), SLM Corp (NASDAQ:SLM), Wyndham Destinations, Inc. (NYSE:WYND), and Performance Food Group Company (NYSE:PFGC). This group of stocks’ market values match NOMD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRI | 25 | 192467 | 6 |
| SLM | 32 | 607447 | 3 |
| WYND | 22 | 456955 | -3 |
| PFGC | 19 | 142121 | -6 |
| Average | 24.5 | 349748 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $476 million in NOMD’s case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand Performance Food Group Company (NYSE:PFGC) is the least popular one with only 19 bullish hedge fund positions. Nomad Foods Limited (NYSE:NOMD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 NOMD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NOMD were disappointed as the stock returned -4% 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
