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Here’s What Hedge Funds Think About US Concrete Inc (USCR)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is US Concrete Inc (NASDAQ:USCR) a good stock to buy now? Money managers are getting less bullish. The number of bullish hedge fund bets were cut by 1 recently. Our calculations also showed that USCR isn’t among the 30 most popular stocks among hedge funds. USCR was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 19 hedge funds in our database with USCR holdings at the end of the previous quarter.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

GOTHAM ASSET MANAGEMENT

Let’s view the latest hedge fund action encompassing US Concrete Inc (NASDAQ:USCR).

How have hedgies been trading US Concrete Inc (NASDAQ:USCR)?

Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in USCR a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

USCR_may2019

Among these funds, GMT Capital held the most valuable stake in US Concrete Inc (NASDAQ:USCR), which was worth $17.8 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $13.9 million worth of shares. Moreover, Red Cedar Management, Shellback Capital, and Point72 Asset Management were also bullish on US Concrete Inc (NASDAQ:USCR), allocating a large percentage of their portfolios to this stock.

Because US Concrete Inc (NASDAQ:USCR) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedge funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management cut the largest stake of the 700 funds monitored by Insider Monkey, comprising an estimated $22.7 million in stock. Charles Paquelet’s fund, Skylands Capital, also dropped its stock, about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to US Concrete Inc (NASDAQ:USCR). We will take a look at Unisys Corporation (NYSE:UIS), El Pollo LoCo Holdings Inc (NASDAQ:LOCO), Intellia Therapeutics, Inc. (NASDAQ:NTLA), and Heidrick & Struggles International, Inc. (NASDAQ:HSII). All of these stocks’ market caps match USCR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UIS 17 96581 3
LOCO 16 29208 2
NTLA 10 15724 0
HSII 22 104567 3
Average 16.25 61520 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $59 million in USCR’s case. Heidrick & Struggles International, Inc. (NASDAQ:HSII) is the most popular stock in this table. On the other hand Intellia Therapeutics, Inc. (NASDAQ:NTLA) is the least popular one with only 10 bullish hedge fund positions. US Concrete Inc (NASDAQ:USCR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on USCR as the stock returned 26.6% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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