It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Martin Marietta Materials, Inc. (NYSE:MLM).
Hedge fund interest in Martin Marietta Materials, Inc. (NYSE:MLM) shares was flat at the end of last quarter, and the company was in 33 hedge fund portfolios. This is usually a negative indicator, and with 33 investors long the stock the company was not one of the 30 most popular stocks among hedge funds in Q3 of 2018. At the end of this article we will also compare MLM to other stocks including Mid America Apartment Communities Inc (NYSE:MAA), Live Nation Entertainment, Inc. (NYSE:LYV), and NRG Energy Inc (NYSE:NRG) to get a better sense of its popularity.
“Martin Marietta Materials Inc., a supplier of aggregates and other heavy construction materials, was impacted by concerns over freight cost inflation, rail logistic problems, and construc- tion labor shortages. There were also concerns about the impact of the recent hurricane on Martin Marietta’s North Carolina quarries.” – First Eagle Fund of America reported about the company in its recent Q3 Commentary.
In the financial world there are several indicators market participants employ to assess stocks. Two of the most innovative indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outperform the market by a solid margin (see the details here).
Let’s take a look at the key hedge fund action regarding Martin Marietta Materials, Inc. (NYSE:MLM).
How are hedge funds trading Martin Marietta Materials, Inc. (NYSE:MLM)?
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in MLM at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Martin Marietta Materials, Inc. (NYSE:MLM) was held by Select Equity Group, which reported holding $448.3 million worth of stock at the end of September. It was followed by Gardner Russo & Gardner with a $361.6 million position. Other investors bullish on the company included Iridian Asset Management, Adage Capital Management, and Alkeon Capital Management.
Seeing as Martin Marietta Materials, Inc. (NYSE:MLM) has experienced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their positions entirely last quarter. It’s worth mentioning that Clint Murray’s Lodge Hill Capital dropped the biggest stake of the 700 funds watched by Insider Monkey, totaling about $67 million in stock. David Thomas’s fund, Atalan Capital, also sold off its stock, about $48 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Martin Marietta Materials, Inc. (NYSE:MLM) but similarly valued. We will take a look at Mid America Apartment Communities Inc (NYSE:MAA), Live Nation Entertainment, Inc. (NYSE:LYV), NRG Energy Inc (NYSE:NRG), and ANGI Homeservices Inc. (NASDAQ:ANGI). All of these stocks’ market caps match MLM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $989 million. That figure was $1.48 billion in MLM’s case. NRG Energy Inc (NYSE:NRG) is the most popular stock in this table. On the other hand Mid America Apartment Communities Inc (NYSE:MAA) is the least popular one with only 15 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 NRG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.