As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Flowers Foods, Inc. (NYSE:FLO).
Flowers Foods, Inc. (NYSE:FLO) was in 21 hedge funds' portfolios at the end of June. The all time high for this statistic is 31. FLO investors should pay attention to a decrease in hedge fund interest lately. There were 26 hedge funds in our database with FLO positions at the end of the first quarter. Our calculations also showed that FLO isn't among the 30 most popular stocks among hedge funds (click for Q2 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's check out the key hedge fund action surrounding Flowers Foods, Inc. (NYSE:FLO).
Do Hedge Funds Think FLO Is A Good Stock To Buy Now?
At the end of June, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FLO over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Flowers Foods, Inc. (NYSE:FLO) was held by Renaissance Technologies, which reported holding $121.9 million worth of stock at the end of June. It was followed by Diamond Hill Capital with a $63.9 million position. Other investors bullish on the company included AQR Capital Management, GAMCO Investors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Flowers Foods, Inc. (NYSE:FLO), around 0.42% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, designating 0.24 percent of its 13F equity portfolio to FLO.
Because Flowers Foods, Inc. (NYSE:FLO) has faced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of money managers that slashed their positions entirely heading into Q3. Interestingly, Chuck Royce's Royce & Associates said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $8 million in stock, and Lee Ainslie's Maverick Capital was right behind this move, as the fund sold off about $3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Flowers Foods, Inc. (NYSE:FLO). These stocks are Signify Health, Inc. (NYSE:SGFY), CIT Group Inc. (NYSE:CIT), Switch, Inc. (NYSE:SWCH), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Science Applications International Corp (NYSE:SAIC), Chesapeake Energy Corporation (NYSE:CHK), and Clean Harbors Inc (NYSE:CLH). This group of stocks' market caps are closest to FLO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SGFY,13,167408,-15 CIT,30,751796,2 SWCH,16,243201,6 APLS,31,877120,-3 SAIC,22,271138,4 CHK,43,1914857,1 CLH,24,359968,-3 Average,25.6,655070,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $655 million. That figure was $283 million in FLO's case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand Signify Health, Inc. (NYSE:SGFY) is the least popular one with only 13 bullish hedge fund positions. Flowers Foods, Inc. (NYSE:FLO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FLO is 33.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on FLO as the stock returned 4.5% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.