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Hedge Funds Aren’t Crazy About The Simply Good Foods Company (SMPL) Anymore

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That's a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is The Simply Good Foods Company (NASDAQ:SMPL) a healthy stock for your portfolio? Hedge funds are becoming less confident. The number of bullish hedge fund positions were cut by 2 in recent months. Our calculations also showed that SMPL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the 21st century investor’s toolkit there are a lot of metrics stock market investors put to use to evaluate their stock investments. Two of the best metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top money managers can outpace the market by a superb margin (see the details here).

[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]

David E. Shaw of D.E. Shaw

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the key hedge fund action encompassing The Simply Good Foods Company (NASDAQ:SMPL).

What does smart money think about The Simply Good Foods Company (NASDAQ:SMPL)?

At Q3's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SMPL over the last 17 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of The Simply Good Foods Company (NASDAQ:SMPL), with a stake worth $64.9 million reported as of the end of September. Trailing Renaissance Technologies was Woodson Capital Management, which amassed a stake valued at $30 million. D E Shaw, Citadel Investment Group, and Marshall Wace 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 Woodson Capital Management allocated the biggest weight to The Simply Good Foods Company (NASDAQ:SMPL), around 4.66% of its 13F portfolio. Lomas Capital Management is also relatively very bullish on the stock, designating 1.14 percent of its 13F equity portfolio to SMPL.

Judging by the fact that The Simply Good Foods Company (NASDAQ:SMPL) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedge funds that elected to cut their positions entirely heading into Q4. Intriguingly, Alexander Charles McAree's Red Cedar Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, valued at an estimated $5.3 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund cut about $1.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Simply Good Foods Company (NASDAQ:SMPL) but similarly valued. We will take a look at Nu Skin Enterprises, Inc. (NYSE:NUS), Pluralsight, Inc. (NASDAQ:PS), Jack in the Box Inc. (NASDAQ:JACK), and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB). This group of stocks' market values are similar to SMPL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUS,20,244787,0 PS,20,140370,0 JACK,29,478938,-4 OMAB,7,48367,0 Average,19,228116,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $220 million in SMPL's case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 7 bullish hedge fund positions. The Simply Good Foods Company (NASDAQ:SMPL) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SMPL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SMPL were disappointed as the stock returned -4.7% during the fourth quarter (through the end of November) 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.

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

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