Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The J.M. Smucker Company (NYSE:SJM) and compare its performance to hedge funds’ consensus picks in 2019.
The J.M. Smucker Company (NYSE:SJM) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of September. At the end of this article we will also compare SJM to other stocks including Tenaris S.A. (NYSE:TS), NetApp Inc. (NASDAQ:NTAP), and Molson Coors Brewing Company (NYSE:TAP) to get a better sense of its popularity.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to review the fresh hedge fund action surrounding The J.M. Smucker Company (NYSE:SJM).
What does smart money think about The J.M. Smucker Company (NYSE:SJM)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in SJM a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in The J.M. Smucker Company (NYSE:SJM) was held by Ariel Investments, which reported holding $166.6 million worth of stock at the end of September. It was followed by D E Shaw with a $48.4 million position. Other investors bullish on the company included Polaris Capital Management, AQR Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to The J.M. Smucker Company (NYSE:SJM), around 2.22% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, dishing out 1.98 percent of its 13F equity portfolio to SJM.
Seeing as The J.M. Smucker Company (NYSE:SJM) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their entire stakes in the third quarter. It’s worth mentioning that Steven Boyd’s Armistice Capital dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $25.8 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $6.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to The J.M. Smucker Company (NYSE:SJM). We will take a look at Tenaris S.A. (NYSE:TS), NetApp Inc. (NASDAQ:NTAP), Molson Coors Brewing Company (NYSE:TAP), and IDEX Corporation (NYSE:IEX). This group of stocks’ market values resemble SJM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TS | 11 | 412435 | -5 |
| NTAP | 24 | 735652 | -2 |
| TAP | 23 | 446659 | -2 |
| IEX | 19 | 454463 | 4 |
| Average | 19.25 | 512302 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $454 million in SJM’s case. NetApp Inc. (NASDAQ:NTAP) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks The J.M. Smucker Company (NYSE:SJM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SJM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SJM were disappointed as the stock returned 14.9% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
