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Hedge Funds Are Cashing Out Of Post Holdings Inc (POST)

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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Post Holdings Inc (NYSE:POST).

Post Holdings Inc (NYSE:POST) was in 31 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 44. POST has seen a decrease in activity from the world's largest hedge funds recently. There were 33 hedge funds in our database with POST holdings at the end of March. Our calculations also showed that POST isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Harold Levy Iridian Asset Management
Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to go over the latest hedge fund action encompassing Post Holdings Inc (NYSE:POST).

Do Hedge Funds Think POST Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the first quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in POST a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Route One Investment Company was the largest shareholder of Post Holdings Inc (NYSE:POST), with a stake worth $759.4 million reported as of the end of June. Trailing Route One Investment Company was Iridian Asset Management, which amassed a stake valued at $217.6 million. Diamond Hill Capital, AREX Capital Management, and Bridger Management 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 AREX Capital Management allocated the biggest weight to Post Holdings Inc (NYSE:POST), around 31.81% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, earmarking 18.27 percent of its 13F equity portfolio to POST.

Due to the fact that Post Holdings Inc (NYSE:POST) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who were dropping their full holdings by the end of the second quarter. At the top of the heap, Jack Woodruff's Candlestick Capital Management dropped the largest stake of all the hedgies monitored by Insider Monkey, totaling about $35.9 million in stock, and Alexander Mitchell's Scopus Asset Management was right behind this move, as the fund dumped about $23.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks similar to Post Holdings Inc (NYSE:POST). We will take a look at Bumble Inc. (NASDAQ:BMBL), Fastly, Inc. (NYSE:FSLY), Boyd Gaming Corporation (NYSE:BYD), Alcoa Corporation (NYSE:AA), Dada Nexus Limited (NASDAQ:DADA), Silicon Laboratories Inc. (NASDAQ:SLAB), and Sotera Health Company (NASDAQ:SHC). All of these stocks' market caps are closest to POST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMBL,23,299269,-6 FSLY,24,1140190,-2 BYD,36,534864,14 AA,44,1155642,6 DADA,18,160572,-3 SLAB,15,283453,-3 SHC,18,437692,-18 Average,25.4,573097,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $573 million. That figure was $1514 million in POST's case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Silicon Laboratories Inc. (NASDAQ:SLAB) is the least popular one with only 15 bullish hedge fund positions. Post Holdings Inc (NYSE:POST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for POST is 51.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately POST wasn't nearly as popular as these 5 stocks and hedge funds that were betting on POST were disappointed as the stock returned -2.8% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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