Matt Sirovich and Jeremy Mindich‘s (pictured) Scopia Capital significantly slashed its holding in The Fresh Market Inc (NASDAQ:TFM) recently by disposing of some 4.20 million shares according to a 13G form filed with the Securities and Exchange Commission. The fund now holds just 246,600 shares valued at $5.80 million based on the current stock price.
Founded in 2001, Scopia Capital had about a 9.65% annualized return from its inception until August 2012. The long/short equity fund employs a fundamentals-based approach to deliver reliable returns. The firm has posted positive gains in every single year, which reflects the downside protection that it promises its investors. Even in 2008 when the S&P 500 plummeted by 37%, Scopia returned 1.81%. Currently, the fund has about $9.81 billion worth of regulatory assets under its management, with the market value of its public equity portfolio standing at $5.15 billion. Nearly 23% of its equity portfolio is invested in the healthcare sector along with 22% in the industrials sector.
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We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by around 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Professional money managers were bullish on the company during the second quarter despite a 21% fall in the stock price. Among the funds that we track, a total of 18 had an aggregate investment of $219.30 million at the end of June, compared to 14 firms with $243.15 million in shares on March 31. Following Scopia’s significant purge of its The Fresh Market Inc (NASDAQ:TFM) shares, Joel Greenblatt‘s Gotham Asset Management is the largest shareholder of the company based on available data, owning some 1.26 million shares valued at $40.50 million. On Gotham’s heels is Matthew A. Weatherbie‘s Weatherbie Capital with 349,300 shares valued at $12.67 million.
Scopia’s latest move isn’t a surprise considering the nearly 43% drop in The Fresh Market Inc (NASDAQ:TFM)’s stock price so far this year. Meanwhile the grocery stores industry is up by almost 4% during the same period. The hedge fund initiated a position in the $1.15 billion specialty grocery retailer during the second quarter of last year. The stock has depreciated by nearly 20% since then. However, the timing of Scopia’s move might not have been perfect considering that The Fresh Market Inc (NASDAQ:TFM) has received an array of upgrades from analysts recently, as Northcoast pushed up its rating to ‘Buy’ from ‘Neutral’, Sterne Agee CRT raised it a notch higher to ‘Neutral’ from ‘Underperform’, and Goldman also jumped on this boat and upgraded the stock to ‘Buy’ from ‘Neutral’.
A major impetus for The Fresh Market Inc (NASDAQ:TFM) is the appointment of a new CEO this month, in the form of Richard Anicetti, who served an eight-year tenure as CEO of Delhaize Group’s subsidiary Food Lion LLC. The company was headed by an interim CEO for eight months during which its performance considerably faltered, especially when compared to the time of former CEO Craig Carlock, when it saw considerable growth. For the second quarter, the EPS of $0.36 was flat on a year-over-year basis and missed the consensus estimates by $0.04, while revenues of $442.1 million were $16.24 million lower than what was expected. The factors to blame here included changes in pricing and promotional investment failing to meet the management’s expectations. As far as growth is concerned, The Fresh Market Inc (NASDAQ:TFM) did manage to open six new stores, remodeled another four, and refreshed three of them. The company is on track to open 18 stores this year.
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