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Last year we predicted the arrival of the first US recession since 2009 and we told in advance 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 The J.M. Smucker Company (NYSE:SJM).
Is SJM stock a buy? The J.M. Smucker Company (NYSE:SJM) has experienced an increase in hedge fund sentiment lately. The J.M. Smucker Company (NYSE:SJM) was in 34 hedge funds' portfolios at the end of December. The all time high for this statistic is 47. There were 31 hedge funds in our database with SJM holdings at the end of September. Our calculations also showed that SJM isn't among the 30 most popular stocks among hedge funds (click for Q4 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. 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 124 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.
Mario Gabelli of GAMCO Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 view the latest hedge fund action encompassing The J.M. Smucker Company (NYSE:SJM).
Do Hedge Funds Think SJM Is A Good Stock To Buy Now?
At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in SJM 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.
The largest stake in The J.M. Smucker Company (NYSE:SJM) was held by Renaissance Technologies, which reported holding $147.7 million worth of stock at the end of December. It was followed by Ariel Investments with a $111.3 million position. Other investors bullish on the company included Two Sigma Advisors, AQR Capital Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to The J.M. Smucker Company (NYSE:SJM), around 1.25% of its 13F portfolio. Te Ahumairangi Investment Management is also relatively very bullish on the stock, dishing out 1.25 percent of its 13F equity portfolio to SJM.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Te Ahumairangi Investment Management, managed by Nicholas Bagnall, initiated the largest position in The J.M. Smucker Company (NYSE:SJM). Te Ahumairangi Investment Management had $9 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Matthew Hulsizer's PEAK6 Capital Management, and Jinghua Yan's TwinBeech Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as The J.M. Smucker Company (NYSE:SJM) but similarly valued. These stocks are James Hardie Industries plc (NYSE:JHX), DaVita Inc (NYSE:DVA), Raymond James Financial, Inc. (NYSE:RJF), Packaging Corporation Of America (NYSE:PKG), Credicorp Ltd. (NYSE:BAP), Pembina Pipeline Corp (NYSE:PBA), and Entegris Inc (NASDAQ:ENTG). This group of stocks' market values match SJM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JHX,4,11803,0 DVA,32,4814258,-2 RJF,34,580848,6 PKG,16,128753,-7 BAP,15,203933,-4 PBA,13,61647,1 ENTG,30,1229128,5 Average,20.6,1004339,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $1004 million. That figure was $580 million in SJM's case. Raymond James Financial, Inc. (NYSE:RJF) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. The J.M. Smucker Company (NYSE:SJM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SJM is 79.7. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on SJM as the stock returned 10.1% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.