Did Hedge Funds Drop The Ball On The Scotts Miracle-Gro Company (SMG) ?

"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards The Scotts Miracle-Gro Company (NYSE:SMG) and see how it was affected.

Is The Scotts Miracle-Gro Company (NYSE:SMG) the right investment to pursue these days? Hedge funds are getting less bullish. The number of bullish hedge fund positions shrunk by 4 recently. Our calculations also showed that smg isn't among the 30 most popular stocks among hedge funds. SMG was in 16 hedge funds' portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with SMG holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

We're going to view the key hedge fund action surrounding The Scotts Miracle-Gro Company (NYSE:SMG).

Hedge fund activity in The Scotts Miracle-Gro Company (NYSE:SMG)

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in SMG a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of The Scotts Miracle-Gro Company (NYSE:SMG), with a stake worth $93.6 million reported as of the end of March. Trailing Fisher Asset Management was Markel Gayner Asset Management, which amassed a stake valued at $23.4 million. Winton Capital Management, Citadel Investment Group, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.