The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards United Natural Foods, Inc. (NASDAQ:UNFI), and what that likely means for the prospects of the company and its stock.
United Natural Foods, Inc. (NASDAQ:UNFI) has seen an increase in support from the world’s most elite money managers of late. Our calculations also showed that UNFI isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the key hedge fund action encompassing United Natural Foods, Inc. (NASDAQ:UNFI).
What does the smart money think about United Natural Foods, Inc. (NASDAQ:UNFI)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in UNFI at the beginning of this year. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in United Natural Foods, Inc. (NASDAQ:UNFI) was held by Millennium Management, which reported holding $28.1 million worth of stock at the end of September. It was followed by Impax Asset Management with a $27.6 million position. Other investors bullish on the company included Royce & Associates, Citadel Investment Group, and Arrowstreet Capital.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, initiated the largest position in United Natural Foods, Inc. (NASDAQ:UNFI). Renaissance Technologies had $9.5 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Joel Greenblatt’s Gotham Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as United Natural Foods, Inc. (NASDAQ:UNFI) but similarly valued. We will take a look at WMIH Corp (NASDAQ:WMIH), Global Net Lease, Inc. (NYSE:GNL), Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM), and Industrial Logistics Properties Trust (NASDAQ:ILPT). All of these stocks’ market caps are similar to UNFI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMIH | 31 | 568490 | 13 |
| GNL | 3 | 17876 | -1 |
| SIM | 1 | 2175 | 0 |
| ILPT | 9 | 86914 | -1 |
| Average | 11 | 168864 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $168 million in UNFI’s case. WMIH Corp (NASDAQ:WMIH) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM) is the least popular one with only 1 bullish hedge fund positions. United Natural Foods, Inc. (NASDAQ:UNFI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WMIH might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
