"Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value," are the words of Maran Capital's Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards B&G Foods, Inc. (NYSE:BGS) and see how it was affected.
B&G Foods, Inc. (NYSE:BGS) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that BGS isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a gander at the recent hedge fund action surrounding B&G Foods, Inc. (NYSE:BGS).
What does the smart money think about B&G Foods, Inc. (NYSE:BGS)?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BGS over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in B&G Foods, Inc. (NYSE:BGS) was held by Diamond Hill Capital, which reported holding $67.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $5.3 million position. Other investors bullish on the company included Citadel Investment Group, Gotham Asset Management, and Millennium Management.
Since B&G Foods, Inc. (NYSE:BGS) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of funds who were dropping their entire stakes heading into Q3. Intriguingly, Steven Boyd's Armistice Capital cut the largest investment of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $20.9 million in stock, and Daniel S. Och's OZ Management was right behind this move, as the fund cut about $3.2 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as B&G Foods, Inc. (NYSE:BGS) but similarly valued. These stocks are Flagstar Bancorp Inc (NYSE:FBC), Hailiang Education Group Inc. (NASDAQ:HLG), Kaiser Aluminum Corp. (NASDAQ:KALU), and Myovant Sciences Ltd. (NYSE:MYOV). This group of stocks' market valuations are similar to BGS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FBC,15,167894,-6 HLG,4,8415,-1 KALU,17,135515,4 MYOV,7,133003,0 Average,10.75,111207,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $82 million in BGS's case. Kaiser Aluminum Corp. (NASDAQ:KALU) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 4 bullish hedge fund positions. B&G Foods, Inc. (NYSE:BGS) 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 KALU might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.