Hedge Funds Are Souring On Valmont Industries, Inc. (VMI)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Valmont Industries, Inc. (NYSE:VMI).

Valmont Industries, Inc. (NYSE:VMI) has seen a decrease in activity from the world’s largest hedge funds in recent months. Valmont Industries, Inc. (NYSE:VMI) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that VMI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. With all of this in mind let’s analyze the latest hedge fund action surrounding Valmont Industries, Inc. (NYSE:VMI).

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

At first quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in VMI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the largest position in Valmont Industries, Inc. (NYSE:VMI). Impax Asset Management has a $179.8 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, managed by Chuck Royce, which holds a $81.3 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism comprise Seth Rosen’s Nitorum Capital, Joe Milano’s Greenhouse Funds and Richard S. Meisenberg’s ACK Asset Management. In terms of the portfolio weights assigned to each position ACK Asset Management allocated the biggest weight to Valmont Industries, Inc. (NYSE:VMI), around 4.53% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 4.06 percent of its 13F equity portfolio to VMI.

Because Valmont Industries, Inc. (NYSE:VMI) has witnessed bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their full holdings last quarter. Intriguingly, Carson Yost’s Yost Capital Management cut the biggest stake of all the hedgies watched by Insider Monkey, valued at close to $6.9 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $6.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Valmont Industries, Inc. (NYSE:VMI). These stocks are Exponent, Inc. (NASDAQ:EXPO), IDACORP Inc (NYSE:IDA), Amyris Inc (NASDAQ:AMRS), RLI Corp. (NYSE:RLI), Flowers Foods, Inc. (NYSE:FLO), MSC Industrial Direct Co Inc (NYSE:MSM), and Macy’s, Inc. (NYSE:M). This group of stocks’ market valuations are closest to VMI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXPO 17 63144 2
IDA 17 174429 3
AMRS 14 641287 -1
RLI 14 189969 -1
FLO 26 301870 -1
MSM 20 393613 2
M 31 790325 -3
Average 19.9 364948 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $401 million in VMI’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Amyris Inc (NASDAQ:AMRS) is the least popular one with only 14 bullish hedge fund positions. Valmont Industries, Inc. (NYSE:VMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VMI is 53.1. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately VMI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VMI were disappointed as the stock returned -5.6% since the end of March (through 7/16) 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.