At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Nomad Foods Limited (NYSE:NOMD).
Nomad Foods Limited (NYSE:NOMD) was in 34 hedge funds' portfolios at the end of the first quarter of 2020. NOMD has seen a decrease in hedge fund sentiment recently. There were 35 hedge funds in our database with NOMD holdings at the end of the previous quarter. Our calculations also showed that NOMD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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' 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 S&P 500 ETFs by 51 percentage points since March 2017 (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.
[caption id="attachment_26340" align="aligncenter" width="399"] Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to review the new hedge fund action encompassing Nomad Foods Limited (NYSE:NOMD).
What have hedge funds been doing with Nomad Foods Limited (NYSE:NOMD)?
At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the fourth quarter of 2019. On the other hand, there were a total of 42 hedge funds with a bullish position in NOMD a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Samlyn Capital was the largest shareholder of Nomad Foods Limited (NYSE:NOMD), with a stake worth $108 million reported as of the end of September. Trailing Samlyn Capital was Citadel Investment Group, which amassed a stake valued at $53.6 million. D E Shaw, Millennium Management, and BlueDrive Global Investors 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 BlueDrive Global Investors allocated the biggest weight to Nomad Foods Limited (NYSE:NOMD), around 10.1% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, earmarking 8.66 percent of its 13F equity portfolio to NOMD.
Judging by the fact that Nomad Foods Limited (NYSE:NOMD) has witnessed falling interest from hedge fund managers, it's safe to say that there is a sect of funds that elected to cut their entire stakes last quarter. Interestingly, James Woodson Davis's Woodson Capital Management dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth about $35.8 million in stock, and Michael A. Price and Amos Meron's Empyrean Capital Partners was right behind this move, as the fund sold off about $5.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Nomad Foods Limited (NYSE:NOMD) but similarly valued. These stocks are Exponent, Inc. (NASDAQ:EXPO), Skechers USA Inc (NYSE:SKX), SYNNEX Corporation (NYSE:SNX), and MAXIMUS, Inc. (NYSE:MMS). This group of stocks' market values match NOMD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPO,17,121456,0 SKX,26,485573,-4 SNX,24,263748,2 MMS,26,132535,2 Average,23.25,250828,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $444 million in NOMD's case. Skechers USA Inc (NYSE:SKX) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Nomad Foods Limited (NYSE:NOMD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately NOMD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NOMD were disappointed as the stock returned 14.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.