Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 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 Sprouts Farmers Market Inc (NASDAQ:SFM) in this article.
Sprouts Farmers Market Inc (NASDAQ:SFM) has experienced a decrease in support from the world’s most elite money managers recently. Sprouts Farmers Market Inc (NASDAQ:SFM) was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that SFM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to check out the new hedge fund action encompassing Sprouts Farmers Market Inc (NASDAQ:SFM).
Do Hedge Funds Think SFM Is A Good Stock To Buy Now?
At the end of September, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SFM over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Sprouts Farmers Market Inc (NASDAQ:SFM), worth close to $136.6 million, corresponding to 0.2% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $13.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism contain Israel Englander’s Millennium Management, Noam Gottesman’s GLG Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Arjuna Capital allocated the biggest weight to Sprouts Farmers Market Inc (NASDAQ:SFM), around 0.19% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to SFM.
Judging by the fact that Sprouts Farmers Market Inc (NASDAQ:SFM) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Philip Hempleman’s Ardsley Partners dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.2 million in call options, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) was right behind this move, as the fund dropped about $1.2 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sprouts Farmers Market Inc (NASDAQ:SFM) but similarly valued. These stocks are SolarWinds Corporation (NYSE:SWI), Visteon Corp (NYSE:VC), Brady Corp (NYSE:BRC), International Bancshares Corp (NASDAQ:IBOC), Cedar Fair, L.P. (NYSE:FUN), MarketWise Inc. (NASDAQ:MKTW), and Arbor Realty Trust, Inc. (NYSE:ABR). All of these stocks’ market caps match SFM’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWI,15,1093082,-6 VC,20,163791,0 BRC,19,137359,4 IBOC,23,185522,5 FUN,15,159375,2 MKTW,14,66780,14 ABR,13,68118,-5 Average,17,267718,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $215 million in SFM’s case. International Bancshares Corp (NASDAQ:IBOC) is the most popular stock in this table. On the other hand Arbor Realty Trust, Inc. (NYSE:ABR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Sprouts Farmers Market Inc (NASDAQ:SFM) is more popular among hedge funds. Our overall hedge fund sentiment score for SFM is 78. 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 returned 31.1% in 2021 through December 9th but still managed to beat the market by 5.1 percentage points. Hedge funds were also right about betting on SFM as the stock returned 13.7% since the end of September (through 12/9) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.