In this article we will check out the progression of hedge fund sentiment towards TreeHouse Foods Inc. (NYSE:THS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
TreeHouse Foods Inc. (NYSE:THS) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. THS has seen an increase in activity from the world’s largest hedge funds lately. There were 24 hedge funds in our database with THS holdings at the end of December. Our calculations also showed that THS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. 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 homepage. With all of this in mind let’s check out the new hedge fund action regarding TreeHouse Foods Inc. (NYSE:THS).
Do Hedge Funds Think THS Is A Good Stock To Buy Now?
At first quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in THS over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in TreeHouse Foods Inc. (NYSE:THS) was held by JANA Partners, which reported holding $216.9 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $40.9 million position. Other investors bullish on the company included Millennium Management, Levin Easterly Partners, and Lakewood Capital Management. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to TreeHouse Foods Inc. (NYSE:THS), around 14.63% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, designating 2.13 percent of its 13F equity portfolio to THS.
As one would reasonably expect, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the largest call position in TreeHouse Foods Inc. (NYSE:THS). Citadel Investment Group had $3.2 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Graham F. Smith’s Franklin Street Capital, and Qing Li’s Sciencast Management.
Let’s check out hedge fund activity in other stocks similar to TreeHouse Foods Inc. (NYSE:THS). These stocks are Papa John’s International, Inc. (NASDAQ:PZZA), Microvision, Inc. (NASDAQ:MVIS), The Simply Good Foods Company (NASDAQ:SMPL), Helmerich & Payne, Inc. (NYSE:HP), Vivint Smart Home, Inc. (NYSE:VVNT), GrowGeneration Corp. (NASDAQ:GRWG), and NovaGold Resources Inc. (NYSE:NG). All of these stocks’ market caps are similar to THS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PZZA | 32 | 355821 | 0 |
| MVIS | 12 | 21630 | 6 |
| SMPL | 22 | 177708 | 6 |
| HP | 21 | 152124 | 2 |
| VVNT | 7 | 10266 | -2 |
| GRWG | 18 | 127433 | 0 |
| NG | 15 | 310029 | -3 |
| Average | 18.1 | 165002 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $369 million in THS’s case. Papa John’s International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 7 bullish hedge fund positions. TreeHouse Foods Inc. (NYSE:THS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for THS 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately THS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on THS were disappointed as the stock returned -11% since the end of March (through 7/9) 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.
