Did Hedge Funds Make The Right Call On Eagle Materials, Inc. (EXP)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Eagle Materials, Inc. (NYSE:EXP) based on that data and determine whether they were really smart about the stock.

Eagle Materials, Inc. (NYSE:EXP) was in 34 hedge funds’ portfolios at the end of March. EXP investors should be aware of a decrease in hedge fund sentiment lately. There were 38 hedge funds in our database with EXP holdings at the end of the previous quarter. Our calculations also showed that EXP 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).

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

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Scott Ferguson Sachem Head Capital

Scott Ferguson of Sachem Head Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the new hedge fund action regarding Eagle Materials, Inc. (NYSE:EXP).

What does smart money think about Eagle Materials, Inc. (NYSE:EXP)?

At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EXP over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Sachem Head Capital held the most valuable stake in Eagle Materials, Inc. (NYSE:EXP), which was worth $183.7 million at the end of the third quarter. On the second spot was Broad Bay Capital which amassed $32.9 million worth of shares. Empyrean Capital Partners, Sunriver Management, and Third Avenue Management 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 Sachem Head Capital allocated the biggest weight to Eagle Materials, Inc. (NYSE:EXP), around 17.85% of its 13F portfolio. Broad Bay Capital is also relatively very bullish on the stock, earmarking 9.04 percent of its 13F equity portfolio to EXP.

Since Eagle Materials, Inc. (NYSE:EXP) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, totaling an estimated $21.3 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also cut its stock, about $13.5 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Eagle Materials, Inc. (NYSE:EXP) but similarly valued. We will take a look at Agios Pharmaceuticals Inc (NASDAQ:AGIO), Euronav NV (NYSE:EURN), Allogene Therapeutics, Inc. (NASDAQ:ALLO), and NovaGold Resources Inc. (NYSE:NG). This group of stocks’ market caps resemble EXP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AGIO 23 304362 0
EURN 33 236366 5
ALLO 12 101735 0
NG 19 297032 3
Average 21.75 234874 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $235 million. That figure was $345 million in EXP’s case. Euronav NV (NYSE:EURN) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Eagle Materials, Inc. (NYSE:EXP) 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 gained 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on EXP, though not to the same extent, as the stock returned 20.4% in Q2 and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.