Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Installed Building Products Inc (NYSE:IBP) was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. IBP has experienced a decrease in hedge fund sentiment in recent months. There were 16 hedge funds in our database with IBP holdings 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 Amerisafe, Inc. (NASDAQ:AMSF), Green Dot Corporation (NYSE:GDOT), and Genesco Inc. (NYSE:GCO) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Hedge fund activity in Installed Building Products Inc (NYSE:IBP)
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a 19% decline from the second quarter of 2016. There were a total of 16 hedge funds with a bullish position in IBP at the beginning of this year, with hedge fund sentiment being flat in the first-half of 2016. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GMT Capital, led by Thomas E. Claugus, holds the biggest position in Installed Building Products Inc (NYSE:IBP). GMT Capital has an $18.9 million position in the stock. The second most bullish fund is Jay Petschek and Steven Major’s Corsair Capital Management, with a $12.7 million position; 2.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish contain Matthew Lindenbaum’s Basswood Capital, David Brown’s Hawk Ridge Management, and Richard Driehaus’ Driehaus Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.