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.
Since Installed Building Products Inc (NYSE:IBP) has faced falling interest from hedge fund managers, logic holds that there were a few hedge funds that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the largest position of the 700 funds monitored by Insider Monkey, totaling close to $7.3 million in stock, and Jim Simons’ Renaissance Technologies was right behind this move, as the fund said goodbye to about $2.6 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Installed Building Products Inc (NYSE:IBP) but similarly valued. We will take a look at Amerisafe, Inc. (NASDAQ:AMSF), Green Dot Corporation (NYSE:GDOT), Genesco Inc. (NYSE:GCO), and Knoll Inc (NYSE:KNL). This group of stocks’ market values resemble IBP’s market value.
|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 14 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $54 million in IBP’s case. Green Dot Corporation (NYSE:GDOT) is the most popular stock in this table. On the other hand Amerisafe, Inc. (NASDAQ:AMSF) is the least popular one with only 8 bullish hedge fund positions. Installed Building Products Inc (NYSE:IBP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GDOT might be a better candidate to consider taking a long position in.