Is TreeHouse Foods Inc. (NYSE: THS) a good stock to buy? One of the funds tracked by Insider Monkey, Wedgewood Capital, sold its entire stake in TreeHouse Foods Inc. during the third quarter. TreeHouse Foods is engaged in the packaged foods and beverages business focused on private label products for both retail grocery and food away from home customers. Wedgewood Capital recently released its 2017 Q3 investor letter (you can download a copy here) in which it discussed its investment thesis on TreeHouse Foods Inc. Here is what the investor said about the food processing company:

After a relatively short holding period of just 12 months, we sold our TreeHouse position.  After the acquisition of the Private Brands business from ConAgra in November of 2015, the Company became by far the largest manufacturer and distributor of private label grocery products in the U.S.  With notable size and scale through unmatched scale in both manufacturing and distribution, we believed TreeHouse would significantly benefit from the secular shift toward private label, particularly in higher margin natural and organic segments, while driving out costs in lower growth segments. Specifically, the shift toward private label brands was one of the rare growth opportunities in the increasingly cut-throat battles in nearly every aisle of the grocery store business. We see private brands all around us in our local family-owned grocery stores and in the big national chain stores, as well as food retailers that are uniquely private label – Whole Foods, Trader Joe’s, Aldi, and Costco.

Our investment thesis began to be challenged earlier in the year, as forecasted synergies from the Private Brands acquisition were slow to emerge.  In addition, the cadence and frequency of privately-owned businesses pricing bids began to shorten from the industry standard 12-month pricing, rendering significant volatility to financial results – particularly at the earnings line. The Company’s response – like most of the industry’s – has been to protect revenues by reducing prices.  By this point our original thesis was compromised enough that we sold our position to redeploy capital back into more promising portfolio positions.

For the second quarter of 2017, TreeHouse Foods Inc. booked a loss of $34.2 million, compared to net income of $19.0 million for the same period last year. Its quarterly sales decreased 1.2% compared to the same period last year mainly due to the divestiture of the canned soup and infant feeding business. Shares of the company are down over 7% so far this year.

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Meanwhile, TreeHouse Foods launched the first phase of TreeHouse 2020 restructuring program in the second quarter. TreeHouse 2020 consists of actions to manage the company’s category and customer portfolio and optimize its manufacturing and supply chain. The company’s management believes that, by doing so, TreeHouse can improve its operating margin structure by approximately 300 basis points by the end of 2020.

Nevertheless, many other hedge funds and active manager still love TreeHouse Foods Inc. Among the hedge funds tracked by Insider Monkey, there were 19 funds with bullish positions in the company. Among those funds are 12th Street Asset Management and Stillwater Investment Management.