Is Sanderson Farms, Inc. (SAFM) A Good Stock To Buy?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Sanderson Farms, Inc. (NASDAQ:SAFM).

Is SAFM a good stock to buy now? Sanderson Farms, Inc. (NASDAQ:SAFM) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 36. SAFM investors should pay attention to a decrease in hedge fund interest of late. There were 33 hedge funds in our database with SAFM positions at the end of the second quarter. Our calculations also showed that SAFM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the recent hedge fund action surrounding Sanderson Farms, Inc. (NASDAQ:SAFM).

Gavin Saitowitz of Prelude Capital

Do Hedge Funds Think SAFM Is A Good Stock To Buy Now?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SAFM over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the most valuable position in Sanderson Farms, Inc. (NASDAQ:SAFM), worth close to $146 million, comprising 1.5% of its total 13F portfolio. The second most bullish fund manager is Robert Emil Zoellner of Alpine Associates, with a $71.5 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Renaissance Technologies, Simon Davies’s Sand Grove Capital Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Sand Grove Capital Partners allocated the biggest weight to Sanderson Farms, Inc. (NASDAQ:SAFM), around 5.84% of its 13F portfolio. Alpine Associates is also relatively very bullish on the stock, designating 2.32 percent of its 13F equity portfolio to SAFM.

Because Sanderson Farms, Inc. (NASDAQ:SAFM) has witnessed bearish sentiment from the smart money, we can see that there exists a select few hedge funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Jack Woodruff’s Candlestick Capital Management cut the biggest stake of the 750 funds followed by Insider Monkey, comprising an estimated $41.4 million in stock, and Gilchrist Berg’s Water Street Capital was right behind this move, as the fund sold off about $11.8 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sanderson Farms, Inc. (NASDAQ:SAFM) but similarly valued. These stocks are Portland General Electric Company (NYSE:POR), Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI), Shutterstock Inc (NYSE:SSTK), Daqo New Energy Corp (NYSE:DQ), Signet Jewelers Limited (NYSE:SIG), Ballard Power Systems Inc. (NASDAQ:BLDP), and Mimecast Limited (NASDAQ:MIME). This group of stocks’ market values resemble SAFM’s market value.

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As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $572 million in SAFM’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand Portland General Electric Company (NYSE:POR) is the least popular one with only 15 bullish hedge fund positions. Sanderson Farms, Inc. (NASDAQ:SAFM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAFM is 73.3. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately SAFM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SAFM were disappointed as the stock returned 0% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.