Is Smithfield Foods, Inc. (SFD) Going to Burn These Hedge Funds?

Smithfield Foods, Inc. (NYSE:SFD) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late.

In the eyes of most investors, hedge funds are assumed to be slow, outdated financial tools of years past. While there are more than 8000 funds in operation at the moment, we hone in on the upper echelon of this club, around 450 funds. Most estimates calculate that this group oversees the lion’s share of the smart money’s total asset base, and by keeping an eye on their best equity investments, we have identified a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Equally as integral, optimistic insider trading activity is a second way to break down the marketplace. Just as you’d expect, there are lots of motivations for a bullish insider to downsize shares of his or her company, but only one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the impressive potential of this strategy if you understand where to look (learn more here).

Now, it’s important to take a gander at the recent action regarding Smithfield Foods, Inc. (NYSE:SFD).

What does the smart money think about Smithfield Foods, Inc. (NYSE:SFD)?

At Q1’s end, a total of 28 of the hedge funds we track were bullish in this stock, a change of 4% from the first quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably.

Of the funds we track, Phill Gross and Robert Atchinson’s Adage Capital Management had the largest position in Smithfield Foods, Inc. (NYSE:SFD), worth close to $91.1 million, accounting for 0.3% of its total 13F portfolio. The second largest stake is held by SAC Capital Advisors, managed by Steven Cohen, which held a $42.5 million position; 0.2% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Zac Hirzel’s Hirzel Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and James H. Litinsky’s JHL Capital Group.

Now, specific money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, created the most valuable position in Smithfield Foods, Inc. (NYSE:SFD). Renaissance Technologies had 18.2 million invested in the company at the end of the quarter. Jeffrey Smith’s Starboard Value LP also made a $9.9 million investment in the stock during the quarter. The following funds were also among the new SFD investors: Matthew Hulsizer’s PEAK6 Capital Management, Michael Price’s MFP Investors, and Tom Sandell’s Sandell Asset Management.

Insider trading activity in Smithfield Foods, Inc. (NYSE:SFD)

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the last six-month time frame, Smithfield Foods, Inc. (NYSE:SFD) has experienced zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Smithfield Foods, Inc. (NYSE:SFD). These stocks are Tyson Foods, Inc. (NYSE:TSN), Leucadia National Corp. (NYSE:LUK), Pilgrim’s Pride Corporation (NASDAQ:PPC), and Seaboard Corporation (NYSEAMEX:SEB). This group of stocks are in the meat products industry and their market caps match SFD’s market cap.