Hedge Funds Are Betting On Builders FirstSource, Inc. (BLDR)

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Builders FirstSource, Inc. (NASDAQ:BLDR) .

Builders FirstSource, Inc. (NASDAQ:BLDR) was in 34 hedge funds’ portfolios at the end of September. BLDR shareholders have witnessed an increase in hedge fund interest of late. There were 33 hedge funds in our database with BLDR holdings at the end of the previous quarter. At the end of this article we will also compare BLDR to other stocks including TopBuild Corp (NYSE:BLD), Emergent Biosolutions Inc (NYSE:EBS), and Pacira Pharmaceuticals Inc (NASDAQ:PCRX) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Hedge fund activity in Builders FirstSource, Inc. (NASDAQ:BLDR)

At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 3% from the second quarter of 2016. On the other hand, there were a total of 30 hedge funds with a bullish position in BLDR at the beginning of this year. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Alexander Medina Seaver’s Stadium Capital Management has the biggest position in Builders FirstSource, Inc. (NASDAQ:BLDR), worth close to $98.7 million, corresponding to 31.9% of its total 13F portfolio. The second largest stake is held by Raging Capital Management, led by William C. Martin, holding a $81.4 million position; 11.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Richard Barrera’s Roystone Capital Partners and Ed Bosek’s BeaconLight Capital. We should note that two of these hedge funds (Raging Capital Management and Raging Capital Management) 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.