Is BLDR Stock A Buy or Sell?

At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Builders FirstSource, Inc. (NASDAQ:BLDR) makes for a good investment right now.

Is BLDR stock a buy? Builders FirstSource, Inc. (NASDAQ:BLDR) was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 43. BLDR investors should be aware of a decrease in enthusiasm from smart money of late. There were 38 hedge funds in our database with BLDR positions at the end of the third quarter. Our calculations also showed that BLDR isn’t among the 30 most popular stocks among hedge funds (click for Q4 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. 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 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Now we’re going to take a look at the recent hedge fund action regarding Builders FirstSource, Inc. (NASDAQ:BLDR).

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

At Q4’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLDR over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the largest position in Builders FirstSource, Inc. (NASDAQ:BLDR). Select Equity Group has a $248.8 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Samlyn Capital, led by Robert Pohly, holding a $88.6 million position; 1.3% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism contain Ben Jacobs’s Anomaly Capital Management, Quincy Lee’s Ancient Art (Teton Capital) and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Builders FirstSource, Inc. (NASDAQ:BLDR), around 11.86% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, setting aside 7.33 percent of its 13F equity portfolio to BLDR.

Because Builders FirstSource, Inc. (NASDAQ:BLDR) has faced declining sentiment from hedge fund managers, logic holds that there is a sect of hedgies who were dropping their entire stakes by the end of the fourth quarter. Intriguingly, Alexander Medina Seaver’s Stadium Capital Management sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $27.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $8.1 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Builders FirstSource, Inc. (NASDAQ:BLDR). We will take a look at Cirrus Logic, Inc. (NASDAQ:CRUS), Bloom Energy Corporation (NYSE:BE), Qualys Inc (NASDAQ:QLYS), PennyMac Financial Services Inc (NYSE:PFSI), Rexnord Corp (NYSE:RXN), Emergent Biosolutions Inc (NYSE:EBS), and Popular Inc (NASDAQ:BPOP). This group of stocks’ market values are closest to BLDR’s market value.

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As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $755 million in BLDR’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand Bloom Energy Corporation (NYSE:BE) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Builders FirstSource, Inc. (NASDAQ:BLDR) is more popular among hedge funds. Our overall hedge fund sentiment score for BLDR is 79.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on BLDR as the stock returned 16.1% since the end of December (through 4/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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