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Hedge Funds Are Warming Up To James Hardie Industries plc (JHX)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards James Hardie Industries plc (NYSE:JHX).

Is James Hardie Industries plc (NYSE:JHX) a safe investment now? Money managers are in a bullish mood. The number of long hedge fund positions moved up by 1 recently. Our calculations also showed that JHX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In today’s marketplace there are dozens of metrics market participants have at their disposal to value stocks. A pair of the most useful metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the market by a very impressive margin (see the details here).

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing James Hardie Industries plc (NYSE:JHX).

What have hedge funds been doing with James Hardie Industries plc (NYSE:JHX)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JHX over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in James Hardie Industries plc (NYSE:JHX), worth close to $4.8 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is D E Shaw, managed by D. E. Shaw, which holds a $1.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to James Hardie Industries plc (NYSE:JHX), around 0.0047% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, earmarking 0.0024 percent of its 13F equity portfolio to JHX.

Now, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most outsized position in James Hardie Industries plc (NYSE:JHX). Millennium Management had $0.2 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as James Hardie Industries plc (NYSE:JHX) but similarly valued. We will take a look at News Corp (NASDAQ:NWS), CACI International Inc (NYSE:CACI), News Corp (NASDAQ:NWSA), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market caps are similar to JHX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWS 13 28126 6
CACI 25 321834 1
NWSA 28 296954 2
PRAH 29 189694 -9
Average 23.75 209152 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $7 million in JHX’s case. PRA Health Sciences Inc (NASDAQ:PRAH) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks James Hardie Industries plc (NYSE:JHX) is even less popular than NWS. Hedge funds clearly dropped the ball on JHX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on JHX as the stock returned 43.7% so far in the second quarter and outperformed the market by an even larger margin.

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

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