Are Hedge Funds Seeking Shelter Under Beacon Roofing Supply, Inc. (BECN)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Beacon Roofing Supply, Inc. (NASDAQ:BECN) based on those filings.

Is Beacon Roofing Supply, Inc. (NASDAQ:BECN) a buy right now? Prominent investors are getting less optimistic. The number of long hedge fund bets retreated by 2 recently. Our calculations also showed that BECN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). BECN was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with BECN positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most market participants, hedge funds are perceived as slow, old investment tools of years past. While there are over 8000 funds with their doors open at the moment, Our experts look at the leaders of this group, about 850 funds. Most estimates calculate that this group of people direct the majority of the smart money’s total capital, and by keeping an eye on their top equity investments, Insider Monkey has discovered several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the key hedge fund action regarding Beacon Roofing Supply, Inc. (NASDAQ:BECN).

How are hedge funds trading Beacon Roofing Supply, Inc. (NASDAQ:BECN)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in BECN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Adage Capital Management held the most valuable stake in Beacon Roofing Supply, Inc. (NASDAQ:BECN), which was worth $53.7 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $53.4 million worth of shares. Fisher Asset Management, Soapstone Capital, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Beacon Roofing Supply, Inc. (NASDAQ:BECN), around 9.62% of its 13F portfolio. Iridian Asset Management is also relatively very bullish on the stock, setting aside 1.29 percent of its 13F equity portfolio to BECN.

Judging by the fact that Beacon Roofing Supply, Inc. (NASDAQ:BECN) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, Clint Carlson’s Carlson Capital dumped the biggest position of all the hedgies followed by Insider Monkey, comprising close to $7 million in stock, and Ian Simm’s Impax Asset Management was right behind this move, as the fund dumped about $3.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Beacon Roofing Supply, Inc. (NASDAQ:BECN). These stocks are LGI Homes Inc (NASDAQ:LGIH), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), Shutterstock Inc (NYSE:SSTK), and Industrial Logistics Properties Trust (NASDAQ:ILPT). All of these stocks’ market caps are similar to BECN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LGIH 14 53155 1
MDRX 17 126905 -14
SSTK 13 77238 -2
ILPT 9 60718 -4
Average 13.25 79504 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $164 million in BECN’s case. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is the most popular stock in this table. On the other hand Industrial Logistics Properties Trust (NASDAQ:ILPT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Beacon Roofing Supply, Inc. (NASDAQ:BECN) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on BECN as the stock returned 69.7% so far in Q2 (through June 17th) 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.