The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Summit Materials Inc (NYSE:SUM) based on those filings.
Summit Materials Inc (NYSE:SUM) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. SUM was in 27 hedge funds’ portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with SUM holdings at the end of the previous quarter. Our calculations also showed that SUM 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.
If you’d ask most stock holders, hedge funds are perceived as slow, outdated investment tools of the past. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the elite of this group, about 850 funds. These money managers control bulk of all hedge funds’ total asset base, and by keeping an eye on their inimitable equity investments, Insider Monkey has identified many investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Philip Hempleman of Ardsley Partners
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the key hedge fund action encompassing Summit Materials Inc (NYSE:SUM).
Hedge fund activity in Summit Materials Inc (NYSE:SUM)
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in SUM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the number one position in Summit Materials Inc (NYSE:SUM). Adage Capital Management has a $63.5 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Thomas E. Claugus of GMT Capital, with a $46.5 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Ken Griffin’s Citadel Investment Group, Wallace Weitz’s Wallace R. Weitz & Co. and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Red Cedar Management allocated the biggest weight to Summit Materials Inc (NYSE:SUM), around 4.99% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, setting aside 4.56 percent of its 13F equity portfolio to SUM.
Due to the fact that Summit Materials Inc (NYSE:SUM) has faced falling interest from the smart money, logic holds that there exists a select few funds that slashed their positions entirely heading into Q4. Interestingly, Alexander Mitchell’s Scopus Asset Management sold off the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $34.9 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund dropped about $6.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 8 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Summit Materials Inc (NYSE:SUM) but similarly valued. We will take a look at Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Tower Semiconductor Ltd. (NASDAQ:TSEM), Xencor Inc (NASDAQ:XNCR), and Micro Focus Intl PLC (NYSE:MFGP). This group of stocks’ market values match SUM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBA | 3 | 28755 | 0 |
| TSEM | 11 | 272127 | -5 |
| XNCR | 13 | 162286 | -3 |
| MFGP | 9 | 13639 | -2 |
| Average | 9 | 119202 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $248 million in SUM’s case. Xencor Inc (NASDAQ:XNCR) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Summit Materials Inc (NYSE:SUM) is more popular among hedge funds. 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. Unfortunately SUM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SUM were disappointed as the stock returned 1.3% during the second quarter (through the end of May) 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.
