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Cal-Maine Foods Inc (CALM): Are Hedge Funds Right About This Stock?

Nina Todic

At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Cal-Maine Foods Inc (NASDAQ:CALM) makes for a good investment right now.

Cal-Maine Foods Inc (NASDAQ:CALM) investors should pay attention to an increase in hedge fund interest of late. CALM was in 21 hedge funds' portfolios at the end of the third quarter of 2018. There were 20 hedge funds in our database with CALM positions at the end of the previous quarter. Our calculations also showed that calm isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.

Chuck Royce

Let's view the new hedge fund action regarding Cal-Maine Foods Inc (NASDAQ:CALM).

How have hedgies been trading Cal-Maine Foods Inc (NASDAQ:CALM)?

Heading into the fourth quarter of 2018, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CALM over the last 13 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CALM Positions

More specifically, Royce & Associates was the largest shareholder of Cal-Maine Foods Inc (NASDAQ:CALM), with a stake worth $48.7 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $36.6 million. Diamond Hill Capital, Millennium Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, initiated the biggest position in Cal-Maine Foods Inc (NASDAQ:CALM). Holocene Advisors had $0.9 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also made a $0.1 million investment in the stock during the quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cal-Maine Foods Inc (NASDAQ:CALM) but similarly valued. These stocks are Yext, Inc. (NYSE:YEXT), El Paso Electric Company (NYSE:EE), Main Street Capital Corporation (NYSE:MAIN), and Nelnet, Inc. (NYSE:NNI). All of these stocks' market caps match CALM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YEXT,16,203971,2 EE,15,308083,4 MAIN,8,8622,1 NNI,15,84035,1 Average,13.5,151178,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $190 million in CALM's case. Yext, Inc. (NYSE:YEXT) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Cal-Maine Foods Inc (NASDAQ:CALM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None. This article was originally published at Insider Monkey.

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