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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Flowers Foods, Inc. (NYSE:FLO) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is FLO a good stock to buy? Flowers Foods, Inc. (NYSE:FLO) was in 30 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 31. FLO investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 24 hedge funds in our database with FLO holdings at the end of June. Our calculations also showed that FLO isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a gander at the key hedge fund action surrounding Flowers Foods, Inc. (NYSE:FLO).
Do Hedge Funds Think FLO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FLO over the last 21 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Flowers Foods, Inc. (NYSE:FLO), worth close to $133.3 million, accounting for 0.1% of its total 13F portfolio. On Renaissance Technologies's heels is Ric Dillon of Diamond Hill Capital, with a $52.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Cliff Asness's AQR Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to Flowers Foods, Inc. (NYSE:FLO), around 0.32% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, setting aside 0.29 percent of its 13F equity portfolio to FLO.
Now, specific money managers have jumped into Flowers Foods, Inc. (NYSE:FLO) headfirst. GLG Partners, managed by Noam Gottesman, initiated the largest position in Flowers Foods, Inc. (NYSE:FLO). GLG Partners had $7.7 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new FLO investors: Steve Cohen's Point72 Asset Management, Joel Greenblatt's Gotham Asset Management, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's go over hedge fund activity in other stocks similar to Flowers Foods, Inc. (NYSE:FLO). These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Sonoco Products Company (NYSE:SON), Blueprint Medicines Corporation (NASDAQ:BPMC), ITT Inc. (NYSE:ITT), BlackLine, Inc. (NASDAQ:BL), and Eastgroup Properties Inc (NYSE:EGP). This group of stocks' market caps match FLO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTEK,22,88894,3 AVAL,4,9119,-5 SON,29,149777,4 BPMC,34,1220886,-4 ITT,30,477657,5 BL,17,233073,-1 EGP,10,51895,-4 Average,20.9,318757,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $319 million. That figure was $299 million in FLO's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 bullish hedge fund positions. Flowers Foods, Inc. (NYSE:FLO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLO is 82.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately FLO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FLO were disappointed as the stock returned -6.4% since the end of September (through 12/18) and underperformed 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.