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SunOpta, Inc. (STKL) Is Burning These Hedge Funds

Nina Todic

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

SunOpta, Inc. (NASDAQ:STKL) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that STKL 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.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glenn Welling Engaged Capital
Glenn Welling Engaged Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, 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. Let's go over the new hedge fund action regarding SunOpta, Inc. (NASDAQ:STKL).

Hedge fund activity in SunOpta, Inc. (NASDAQ:STKL)

At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in STKL over the last 16 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

No of Hedge Funds with STKL Positions
No of Hedge Funds with STKL Positions

Among these funds, Engaged Capital held the most valuable stake in SunOpta, Inc. (NASDAQ:STKL), which was worth $28.7 million at the end of the second quarter. On the second spot was Ardsley Partners which amassed $27.7 million worth of shares. Moreover, Oaktree Capital Management, Point72 Asset Management, and Royce & Associates were also bullish on SunOpta, Inc. (NASDAQ:STKL), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, specific money managers were leading the bulls' herd. Wynnefield Capital, managed by Nelson Obus, assembled the most outsized position in SunOpta, Inc. (NASDAQ:STKL). Wynnefield Capital had $0.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's now review hedge fund activity in other stocks similar to SunOpta, Inc. (NASDAQ:STKL). We will take a look at CASI Pharmaceuticals Inc (NASDAQ:CASI), Hydrogenics Corporation (NASDAQ:HYGS), Landec Corporation (NASDAQ:LNDC), and WhiteHorse Finance, Inc. (NASDAQ:WHF). This group of stocks' market valuations are similar to STKL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CASI,1,122,-3 HYGS,7,3311,4 LNDC,11,33094,3 WHF,5,5089,2 Average,6,10404,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $113 million in STKL's case. Landec Corporation (NASDAQ:LNDC) is the most popular stock in this table. On the other hand CASI Pharmaceuticals Inc (NASDAQ:CASI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks SunOpta, Inc. (NASDAQ:STKL) is more popular among hedge funds. 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 STKL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on STKL were disappointed as the stock returned -45.3% 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 in Q3.

Disclosure: None. This article was originally published at Insider Monkey.

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