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Hedge Funds Are Very Bullish On Vulcan Materials Company (VMC)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Vulcan Materials Company (NYSE:VMC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Vulcan Materials Company (NYSE:VMC) the right investment to pursue these days? The smart money was taking a bullish view. The number of bullish hedge fund positions increased by 2 lately. Vulcan Materials Company (NYSE:VMC) was in 51 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VMC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a peek at the new hedge fund action encompassing Vulcan Materials Company (NYSE:VMC).

Hedge fund activity in Vulcan Materials Company (NYSE:VMC)

Heading into the third quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 52 hedge funds with a bullish position in VMC a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Vulcan Materials Company (NYSE:VMC) was held by Theleme Partners, which reported holding $142.7 million worth of stock at the end of September. It was followed by D E Shaw with a $106.9 million position. Other investors bullish on the company included Alkeon Capital Management, Lansdowne Partners, and Wallace R. Weitz & Co.. In terms of the portfolio weights assigned to each position Theleme Partners allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 6.73% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, setting aside 5.71 percent of its 13F equity portfolio to VMC.

As aggregate interest increased, some big names were leading the bulls’ herd. Theleme Partners, managed by Patrick Degorce, established the largest position in Vulcan Materials Company (NYSE:VMC). Theleme Partners had $142.7 million invested in the company at the end of the quarter. Alex Snow’s Lansdowne Partners also initiated a $90.1 million position during the quarter. The following funds were also among the new VMC investors: Sharlyn C. Heslam’s Stockbridge Partners, Lee Hicks and Jan Koerner’s Park Presidio Capital, and Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are Telefonica Brasil SA (NYSE:VIV), Quest Diagnostics Incorporated (NYSE:DGX), Cardinal Health, Inc. (NYSE:CAH), Tractor Supply Company (NASDAQ:TSCO), CBRE Group, Inc. (NYSE:CBRE), BioNTech SE (NASDAQ:BNTX), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks’ market valuations are similar to VMC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIV 12 99788 4
DGX 46 804000 8
CAH 49 956785 5
TSCO 38 828499 1
CBRE 29 1442786 -4
BNTX 15 367554 9
COO 34 876136 9
Average 31.9 767935 4.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $768 million. That figure was $880 million in VMC’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Vulcan Materials Company (NYSE:VMC) is more popular among hedge funds. Our overall hedge fund sentiment score for VMC is 87. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately VMC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VMC were disappointed as the stock returned 3.9% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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