Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Nomad Foods Limited Ordinary Shares (NYSE:NOMD).
Is Nomad Foods Limited Ordinary Shares (NYSE:NOMD) ready to rally soon? Prominent investors are taking a pessimistic view. The number of bullish hedge fund positions decreased by 5 recently. Our calculations also showed that NOMD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are numerous indicators stock traders employ to evaluate their holdings. A couple of the most under-the-radar indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the S&P 500 by a healthy amount (see the details here).
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action encompassing Nomad Foods Limited Ordinary Shares (NYSE:NOMD).
How have hedgies been trading Nomad Foods Limited Ordinary Shares (NYSE:NOMD)?
At Q4’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in NOMD over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Samlyn Capital held the most valuable stake in Nomad Foods Limited Ordinary Shares (NYSE:NOMD), which was worth $72.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $60.6 million worth of shares. Millennium Management, D E Shaw, and Woodson Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position BlueDrive Global Investors allocated the biggest weight to Nomad Foods Limited Ordinary Shares (NYSE:NOMD), around 8.33% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, designating 7.41 percent of its 13F equity portfolio to NOMD.
Since Nomad Foods Limited Ordinary Shares (NYSE:NOMD) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who sold off their full holdings by the end of the third quarter. Intriguingly, Scott Kapnick’s HPS Investment Partners cut the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $19.1 million in stock. Renaissance Technologies, also sold off its stock, about $6.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Nomad Foods Limited Ordinary Shares (NYSE:NOMD). These stocks are Dicks Sporting Goods Inc (NYSE:DKS), Axon Enterprise, Inc. (NASDAQ:AAXN), LHC Group, Inc. (NASDAQ:LHCG), and AutoNation, Inc. (NYSE:AN). All of these stocks’ market caps are closest to NOMD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DKS | 26 | 515908 | 0 |
| AAXN | 25 | 355346 | 5 |
| LHCG | 26 | 141372 | -3 |
| AN | 31 | 409983 | 7 |
| Average | 27 | 355652 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $520 million in NOMD’s case. AutoNation, Inc. (NYSE:AN) is the most popular stock in this table. On the other hand Axon Enterprise, Inc. (NASDAQ:AAXN) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Nomad Foods Limited Ordinary Shares (NYSE:NOMD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 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 -26.3% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
