Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).
Is John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) a bargain? The smart money is buying. The number of bullish hedge fund bets moved up by 1 recently. Our calculations also showed that jbss isn't among the 30 most popular stocks among hedge funds. JBSS was in 11 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with JBSS positions at the end of the previous quarter.
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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the latest hedge fund action regarding John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS).
What have hedge funds been doing with John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JBSS over the last 15 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), with a stake worth $93.7 million reported as of the end of March. Trailing Royce & Associates was AQR Capital Management, which amassed a stake valued at $4.4 million. Citadel Investment Group, GAMCO Investors, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Gotham Asset Management, managed by Joel Greenblatt, created the largest position in John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). Gotham Asset Management had $0.3 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $0.2 million position during the quarter. The only other fund with a brand new JBSS position is Paul Tudor Jones's Tudor Investment Corp.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) but similarly valued. We will take a look at Monotype Imaging Holdings Inc. (NASDAQ:TYPE), Principia Biopharma Inc. (NASDAQ:PRNB), Weidai Ltd. (NYSE:WEI), and Origin Bancorp, Inc. (NASDAQ:OBNK). This group of stocks' market values are similar to JBSS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYPE,21,228038,4 PRNB,11,245376,-1 WEI,1,521,0 OBNK,4,25101,-1 Average,9.25,124759,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $107 million in JBSS's case. Monotype Imaging Holdings Inc. (NASDAQ:TYPE) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on JBSS as the stock returned 9.8% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.