Hedge Funds Are Dumping Martin Marietta Materials, Inc. (MLM)

Is Martin Marietta Materials, Inc. (NYSE:MLM) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Martin Marietta Materials, Inc. (NYSE:MLM) a marvelous stock to buy now? The smart money is taking a bearish view. The number of bullish hedge fund positions dropped by 2 recently. MLM was in 35 hedge funds’ portfolios at the end of the third quarter of 2016. There were 37 hedge funds in our database with MLM positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Alcoa Inc (NYSE:AA), Centene Corp (NYSE:CNC), and Tractor Supply Company (NASDAQ:TSCO) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, we’re going to take a glance at the latest action surrounding Martin Marietta Materials, Inc. (NYSE:MLM).

What have hedge funds been doing with Martin Marietta Materials, Inc. (NYSE:MLM)?

Heading into the fourth quarter of 2016, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 5% from the second quarter of 2016. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Tom Russo’s Gardner Russo & Gardner has the largest position in Martin Marietta Materials, Inc. (NYSE:MLM), worth close to $370.6 million and amounting to 3.1% of its total 13F portfolio. The second largest stake is held by Egerton Capital Limited, led by John Armitage, holding a $180.1 million position; the fund has 2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Robert Joseph Caruso’s Select Equity Group, Ken Heebner’s Capital Growth Management and Phill Gross and Robert Atchinson’s Adage Capital Management.

Judging by the fact that Martin Marietta Materials, Inc. (NYSE:MLM) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who sold off their full holdings heading into Q4. At the top of the heap, Jean-Marie Eveillard’s First Eagle Investment Management dropped the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $267.6 million in stock, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund dumped about $35.4 million worth of MLM shares. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Martin Marietta Materials, Inc. (NYSE:MLM). These stocks are Alcoa Inc (NYSE:AA), Centene Corp (NYSE:CNC), Tractor Supply Company (NASDAQ:TSCO), and Autodesk, Inc. (NASDAQ:ADSK). This group of stocks’ market caps are similar to MLM’s market cap.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.92 billion. That figure was $1.22 billion in MLM’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Centene Corp (NYSE:CNC) is the least popular one with only 22 bullish hedge fund positions. Martin Marietta Materials, Inc. (NYSE:MLM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ADSK might be a better candidate to consider a long position.

Disclosure: none.