We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Nomad Foods Limited (NYSE:NOMD) and determine whether hedge funds skillfully traded this stock.
Is Nomad Foods Limited (NYSE:NOMD) a safe investment today? Money managers were getting less bullish. The number of bullish hedge fund positions retreated by 1 lately. Our calculations also showed that NOMD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, We hone in on the upper echelon of this group, about 850 funds. It is estimated that this group of investors control the majority of all hedge funds' total capital, and by observing their unrivaled picks, Insider Monkey has determined numerous investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_845793" align="aligncenter" width="400"] Peter Rathjens of Arrowstreet Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a peek at the fresh hedge fund action regarding Nomad Foods Limited (NYSE:NOMD).
What does smart money think about Nomad Foods Limited (NYSE:NOMD)?
At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the fourth quarter of 2019. By comparison, 42 hedge funds held shares or bullish call options in NOMD a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Samlyn Capital held the most valuable stake in Nomad Foods Limited (NYSE:NOMD), which was worth $108 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $53.6 million worth of shares. D E Shaw, Millennium Management, and BlueDrive Global Investors 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 BlueDrive Global Investors allocated the biggest weight to Nomad Foods Limited (NYSE:NOMD), around 10.1% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, earmarking 8.66 percent of its 13F equity portfolio to NOMD.
Due to the fact that Nomad Foods Limited (NYSE:NOMD) has faced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedgies that decided to sell off their positions entirely by the end of the first quarter. It's worth mentioning that James Woodson Davis's Woodson Capital Management sold off the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $35.8 million in stock. Michael A. Price and Amos Meron's fund, Empyrean Capital Partners, also dropped its stock, about $5.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Nomad Foods Limited (NYSE:NOMD). These stocks are Exponent, Inc. (NASDAQ:EXPO), Skechers USA Inc (NYSE:SKX), SYNNEX Corporation (NYSE:SNX), and MAXIMUS, Inc. (NYSE:MMS). This group of stocks' market caps are closest to NOMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPO,17,121456,0 SKX,26,485573,-4 SNX,24,263748,2 MMS,26,132535,2 Average,23.25,250828,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $444 million in NOMD's case. Skechers USA Inc (NYSE:SKX) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Nomad Foods Limited (NYSE:NOMD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately NOMD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NOMD were disappointed as the stock returned 15.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.