Is Flowers Foods, Inc. (NYSE:FLO) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Flowers Foods, Inc. (NYSE:FLO) investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that FLO 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 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the new hedge fund action encompassing Flowers Foods, Inc. (NYSE:FLO).
What does smart money think about Flowers Foods, Inc. (NYSE:FLO)?
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FLO over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of Flowers Foods, Inc. (NYSE:FLO), with a stake worth $71.7 million reported as of the end of March. Trailing Diamond Hill Capital was Renaissance Technologies, which amassed a stake valued at $41.5 million. GAMCO Investors, GLG Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in Flowers Foods, Inc. (NYSE:FLO). Millennium Management had $11 million invested in the company at the end of the quarter. Perella Weinberg Partners also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new FLO investors: Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Matthew Tewksbury's Stevens Capital Management.
Let's go over hedge fund activity in other stocks similar to Flowers Foods, Inc. (NYSE:FLO). We will take a look at CIT Group Inc. (NYSE:CIT), EnLink Midstream LLC (NYSE:ENLC), Choice Hotels International, Inc. (NYSE:CHH), and Eaton Vance Corp (NYSE:EV). All of these 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 CIT,25,878786,0 ENLC,12,39620,2 CHH,19,193292,1 EV,15,97050,2 Average,17.75,302187,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $202 million in FLO's case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 12 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. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 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 0.2% during the third 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 20 most popular stocks (view the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.