The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought United Natural Foods, Inc. (NASDAQ:UNFI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
United Natural Foods, Inc. (NASDAQ:UNFI) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. UNFI has experienced an increase in hedge fund interest of late. There were 18 hedge funds in our database with UNFI positions at the end of the first quarter. Our calculations also showed that UNFI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we’re going to go over the recent hedge fund action encompassing United Natural Foods, Inc. (NASDAQ:UNFI).
What have hedge funds been doing with United Natural Foods, Inc. (NASDAQ:UNFI)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in UNFI 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in United Natural Foods, Inc. (NASDAQ:UNFI). Arrowstreet Capital has a $12 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Valueworks LLC, managed by Charles Lemonides, which holds a $11.3 million position; the fund has 9.7% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Thomas E. Claugus’s GMT Capital, Renaissance Technologies and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Valueworks LLC allocated the biggest weight to United Natural Foods, Inc. (NASDAQ:UNFI), around 9.73% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to UNFI.
Now, specific money managers have jumped into United Natural Foods, Inc. (NASDAQ:UNFI) headfirst. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), initiated the largest position in United Natural Foods, Inc. (NASDAQ:UNFI). Schonfeld Strategic Advisors had $5.8 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $2 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Qing Li’s Sciencast Management, and Jonathan Soros’s JS Capital.
Let’s also examine hedge fund activity in other stocks similar to United Natural Foods, Inc. (NASDAQ:UNFI). We will take a look at SilverCrest Metals Inc. (NYSE:SILV), Archrock, Inc. (NYSE:AROC), Matador Resources Co (NYSE:MTDR), PetIQ, Inc. (NASDAQ:PETQ), Gossamer Bio, Inc. (NASDAQ:GOSS), New York Mortgage Trust, Inc. (NASDAQ:NYMT), and Deluxe Corporation (NYSE:DLX). All of these stocks’ market caps are similar to UNFI’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SILV,9,104921,0 AROC,12,23184,1 MTDR,23,101616,6 PETQ,16,143510,3 GOSS,19,168888,9 NYMT,15,50577,2 DLX,18,68557,3 Average,16,94465,3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $63 million in UNFI’s case. Matador Resources Co (NYSE:MTDR) is the most popular stock in this table. On the other hand SilverCrest Metals Inc. (NYSE:SILV) is the least popular one with only 9 bullish hedge fund positions. United Natural Foods, Inc. (NASDAQ:UNFI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNFI is 77.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately UNFI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UNFI were disappointed as the stock returned -18.3% in Q3 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.