In this article you are going to find out whether hedge funds think US Foods Holding Corp. (NYSE:USFD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
US Foods Holding Corp. (NYSE:USFD) shareholders have witnessed a decrease in enthusiasm from smart money lately. US Foods Holding Corp. (NYSE:USFD) was in 29 hedge funds’ portfolios at the end of September. The all time high for this statistic is 49. Our calculations also showed that USFD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding US Foods Holding Corp. (NYSE:USFD).
Scott Ferguson of Sachem Head Capital
Do Hedge Funds Think USFD Is A Good Stock To Buy Now?
At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. By comparison, 41 hedge funds held shares or bullish call options in USFD a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Leonard Green & Partners was the largest shareholder of US Foods Holding Corp. (NYSE:USFD), with a stake worth $242.6 million reported as of the end of September. Trailing Leonard Green & Partners was Sachem Head Capital, which amassed a stake valued at $235.8 million. Dorsal Capital Management, Melvin Capital Management, and Hawk Ridge Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Solus Alternative Asset Management allocated the biggest weight to US Foods Holding Corp. (NYSE:USFD), around 11.57% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, designating 6.15 percent of its 13F equity portfolio to USFD.
Seeing as US Foods Holding Corp. (NYSE:USFD) has experienced falling interest from the smart money, it’s safe to say that there is a sect of funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Robert Boucai’s Newbrook Capital Advisors dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $58.9 million in stock, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund said goodbye to about $57.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to US Foods Holding Corp. (NYSE:USFD). We will take a look at AerCap Holdings N.V. (NYSE:AER), Kilroy Realty Corp (NYSE:KRC), Apartment Income REIT Corp. (NYSE:AIRC), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), Advanced Drainage Systems Inc. (NYSE:WMS), Brooks Automation, Inc. (NASDAQ:BRKS), and Americold Realty Trust (NYSE:COLD). This group of stocks’ market caps resemble USFD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AER | 42 | 1448787 | -3 |
| KRC | 24 | 422839 | -2 |
| AIRC | 17 | 270935 | 3 |
| LECO | 21 | 288792 | 1 |
| WMS | 21 | 1092988 | -5 |
| BRKS | 29 | 577566 | -3 |
| COLD | 15 | 93728 | -1 |
| Average | 24.1 | 599376 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $1071 million in USFD’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Americold Realty Trust (NYSE:COLD) is the least popular one with only 15 bullish hedge fund positions. US Foods Holding Corp. (NYSE:USFD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for USFD is 42.7. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately USFD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on USFD were disappointed as the stock returned -9.3% since the end of September (through 11/30) 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.
Follow Us Foods Holding Corp. (NYSE:USFD)
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Disclosure: None. This article was originally published at Insider Monkey.
