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Do Hedge Funds Love TopBuild Corp (BLD)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of TopBuild Corp (NYSE:BLD).

TopBuild Corp (NYSE:BLD) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that BLD 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

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. Keeping this in mind we’re going to check out the recent hedge fund action regarding TopBuild Corp (NYSE:BLD).

What have hedge funds been doing with TopBuild Corp (NYSE:BLD)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in BLD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in TopBuild Corp (NYSE:BLD) was held by Hawk Ridge Management, which reported holding $12.8 million worth of stock at the end of September. It was followed by Columbus Circle Investors with a $11.4 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Hawk Ridge Management allocated the biggest weight to TopBuild Corp (NYSE:BLD), around 2.16% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 1.89 percent of its 13F equity portfolio to BLD.

Seeing as TopBuild Corp (NYSE:BLD) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of money managers that decided to sell off their entire stakes by the end of the first quarter. Interestingly, Israel Englander’s Millennium Management sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, worth about $28.1 million in stock, and Anthony Joseph Vaccarino’s North Fourth Asset Management was right behind this move, as the fund cut about $3.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 9 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TopBuild Corp (NYSE:BLD) but similarly valued. We will take a look at LendingTree, Inc (NASDAQ:TREE), Lattice Semiconductor Corporation (NASDAQ:LSCC), Assured Guaranty Ltd. (NYSE:AGO), and W.R. Grace & Co. (NYSE:GRA). This group of stocks’ market caps resemble BLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TREE 21 74029 -5
LSCC 26 531051 -6
AGO 28 299640 -5
GRA 35 866211 -11
Average 27.5 442733 -6.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $80 million in BLD’s case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand LendingTree, Inc (NASDAQ:TREE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks TopBuild Corp (NYSE:BLD) is even less popular than TREE. Hedge funds clearly dropped the ball on BLD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on BLD as the stock returned 75.8% so far in the second quarter and outperformed the market by an even larger margin.

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