Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Nomad Foods Limited (NYSE:NOMD)? The smart money sentiment can provide an answer to this question.
Is NOMD stock a buy? Nomad Foods Limited (NYSE:NOMD) investors should pay attention to a decrease in support from the world’s most elite money managers lately. Nomad Foods Limited (NYSE:NOMD) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 42. Our calculations also showed that NOMD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to check out the latest hedge fund action regarding Nomad Foods Limited (NYSE:NOMD).
Do Hedge Funds Think NOMD Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in NOMD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Nomad Foods Limited (NYSE:NOMD), with a stake worth $140.2 million reported as of the end of December. Trailing Renaissance Technologies was BlueDrive Global Investors, which amassed a stake valued at $31.5 million. D E Shaw, Two Sigma Advisors, and Chescapmanager LLC 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 (NYSE:NOMD), around 6.81% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, designating 6.51 percent of its 13F equity portfolio to NOMD.
Because Nomad Foods Limited (NYSE:NOMD) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. Intriguingly, Robert Pohly’s Samlyn Capital cut the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $28.3 million in stock. Mark Kingdon’s fund, Kingdon Capital, also sold off its stock, about $15.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Nomad Foods Limited (NYSE:NOMD). These stocks are Acadia Healthcare Company Inc (NASDAQ:ACHC), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Acuity Brands, Inc. (NYSE:AYI), Evercore Inc. (NYSE:EVR), Lazard Ltd (NYSE:LAZ), and Envestnet Inc (NYSE:ENV). This group of 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 |
|---|---|---|---|
| ACHC | 29 | 517678 | 5 |
| ARNA | 39 | 895131 | -4 |
| RETA | 24 | 359598 | -1 |
| AYI | 29 | 810405 | -9 |
| EVR | 28 | 297535 | 1 |
| LAZ | 20 | 701466 | 1 |
| ENV | 28 | 122555 | 3 |
| Average | 28.1 | 529195 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $529 million. That figure was $385 million in NOMD’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 20 bullish hedge fund positions. Nomad Foods Limited (NYSE:NOMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NOMD is 43.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on NOMD as the stock returned 15.6% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
