Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Nomad Foods Limited (NYSE:NOMD) in this article.
Is NOMD a good stock to buy? Nomad Foods Limited (NYSE:NOMD) has experienced a decrease in hedge fund sentiment recently. Nomad Foods Limited (NYSE:NOMD) was in 31 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 42. Our calculations also showed that NOMD isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a peek at the fresh hedge fund action encompassing Nomad Foods Limited (NYSE:NOMD).
Do Hedge Funds Think NOMD Is A Good Stock To Buy Now?
At third quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NOMD over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Nomad Foods Limited (NYSE:NOMD), which was worth $125.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $31.6 million worth of shares. BlueDrive Global Investors, Samlyn Capital, and GLG Partners 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 AltraVue Capital allocated the biggest weight to Nomad Foods Limited (NYSE:NOMD), around 8.38% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, dishing out 7.72 percent of its 13F equity portfolio to NOMD.
Because Nomad Foods Limited (NYSE:NOMD) has experienced declining sentiment from hedge fund managers, it's safe to say that there was a specific group of fund managers that slashed their full holdings in the third quarter. It's worth mentioning that Israel Englander's Millennium Management sold off the biggest stake of the 750 funds monitored by Insider Monkey, worth close to $26.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also sold off its stock, about $7.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Nomad Foods Limited (NYSE:NOMD). We will take a look at Oshkosh Corporation (NYSE:OSK), Woodward Inc (NASDAQ:WWD), The Wendy's Company (NASDAQ:WEN), The Middleby Corporation (NASDAQ:MIDD), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), Redfin Corporation (NASDAQ:RDFN), and Ralph Lauren Corporation (NYSE:RL). This group of stocks' market caps are closest to NOMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OSK,29,203174,2 WWD,24,506782,3 WEN,27,1080122,-5 MIDD,30,282005,4 RARE,20,311362,-4 RDFN,28,188897,2 RL,29,473245,4 Average,26.7,435084,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $381 million in NOMD's case. The Middleby Corporation (NASDAQ:MIDD) is the most popular stock in this table. On the other hand Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Nomad Foods Limited (NYSE:NOMD) is more popular among hedge funds. Our overall hedge fund sentiment score for NOMD is 74.1. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Unfortunately NOMD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NOMD were disappointed as the stock returned -1.1% since the end of the third quarter (through 12/18) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.