Hedge Funds Are Betting On Eagle Materials, Inc. (EXP)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Eagle Materials, Inc. (NYSE:EXP).

Eagle Materials, Inc. (NYSE:EXP) investors should be aware of an increase in activity from the world’s largest hedge funds of late. Eagle Materials, Inc. (NYSE:EXP) was in 36 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 41. There were 35 hedge funds in our database with EXP holdings at the end of March. Our calculations also showed that EXP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open at present, Our researchers hone in on the moguls of this club, around 850 funds. Most estimates calculate that this group of people handle bulk of the hedge fund industry’s total asset base, and by keeping track of their best equity investments, Insider Monkey has revealed a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s view the recent hedge fund action surrounding Eagle Materials, Inc. (NYSE:EXP).

Do Hedge Funds Think EXP Is A Good Stock To Buy Now?

At Q2’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the first quarter of 2020. By comparison, 41 hedge funds held shares or bullish call options in EXP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EXP A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Eagle Materials, Inc. (NYSE:EXP), which was worth $51.1 million at the end of the second quarter. On the second spot was Waratah Capital Advisors which amassed $20.9 million worth of shares. SG Capital Management, Third Avenue Management, and Soros Fund Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to Eagle Materials, Inc. (NYSE:EXP), around 8.23% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 5.69 percent of its 13F equity portfolio to EXP.

As one would reasonably expect, specific money managers were breaking ground themselves. Soros Fund Management, managed by George Soros, established the most valuable position in Eagle Materials, Inc. (NYSE:EXP). Soros Fund Management had $11.7 million invested in the company at the end of the quarter. Mark Lee’s Mountaineer Partners Management also made a $11.3 million investment in the stock during the quarter. The other funds with brand new EXP positions are Zilvinas Mecelis’s Covalis Capital, Allan Teh’s Kamunting Street Capital, and Chuck Royce’s Royce & Associates.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Eagle Materials, Inc. (NYSE:EXP) but similarly valued. These stocks are CACI International Inc (NYSE:CACI), Pan American Silver Corp. (NASDAQ:PAAS), Rexnord Corp (NYSE:RXN), National Oilwell Varco, Inc. (NYSE:NOV), Stag Industrial Inc (NYSE:STAG), NCR Corporation (NYSE:NCR), and AbCellera Biologics Inc. (NASDAQ:ABCL). This group of stocks’ market caps match EXP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CACI 26 491404 5
PAAS 24 312456 -3
RXN 29 521863 4
NOV 30 993193 1
STAG 15 232197 -2
NCR 38 526452 14
ABCL 18 773158 -2
Average 25.7 550103 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $244 million in EXP’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 15 bullish hedge fund positions. Eagle Materials, Inc. (NYSE:EXP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXP is 78. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately EXP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EXP were disappointed as the stock returned -5% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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