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. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. In this article we are going to take a look at smart money sentiment towards The J.M. Smucker Company (NYSE:SJM).
Hedge fund interest in The J.M. Smucker Company (NYSE:SJM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SJM to other stocks including Fortinet Inc (NASDAQ:FTNT), Tractor Supply Company (NASDAQ:TSCO), and DexCom, Inc. (NASDAQ:DXCM) to get a better sense of its popularity. Our calculations also showed that SJM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, 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 take a look at the latest hedge fund action surrounding The J.M. Smucker Company (NYSE:SJM).
What have hedge funds been doing with The J.M. Smucker Company (NYSE:SJM)?
At Q2's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in SJM a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in The J.M. Smucker Company (NYSE:SJM) was held by Ariel Investments, which reported holding $177.1 million worth of stock at the end of March. It was followed by Millennium Management with a $70.8 million position. Other investors bullish on the company included Polaris Capital Management, Citadel Investment Group, and Armistice Capital.
Since The J.M. Smucker Company (NYSE:SJM) has faced bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of hedge funds who sold off their positions entirely heading into Q3. At the top of the heap, Steven Boyd's Armistice Capital dumped the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $23.3 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $7.1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to The J.M. Smucker Company (NYSE:SJM). These stocks are Fortinet Inc (NASDAQ:FTNT), Tractor Supply Company (NASDAQ:TSCO), DexCom, Inc. (NASDAQ:DXCM), and Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). This group of stocks' market valuations match SJM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTNT,34,1151583,0 TSCO,35,652759,2 DXCM,30,670521,-3 KOF,9,494995,0 Average,27,742465,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $742 million. That figure was $486 million in SJM's case. Tractor Supply Company (NASDAQ:TSCO) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. The J.M. Smucker Company (NYSE:SJM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 SJM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SJM investors were disappointed as the stock returned -3.7% 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 among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.