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Is Continental Building Products Inc (CBPX) Going to Burn These Hedge Funds?

How do we determine whether Continental Building Products Inc (NYSE:CBPX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Continental Building Products Inc (NYSE:CBPX) worth your attention right now? Prominent investors are becoming less confident. The number of long hedge fund bets decreased by 2 recently. Our calculations also showed that CBPX isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We’re going to take a look at the key hedge fund action encompassing Continental Building Products Inc (NYSE:CBPX).

How have hedgies been trading Continental Building Products Inc (NYSE:CBPX)?

Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the second quarter of 2018. By comparison, 21 hedge funds held shares or bullish call options in CBPX heading into this year. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

CBPX_dec2018

The largest stake in Continental Building Products Inc (NYSE:CBPX) was held by D E Shaw, which reported holding $42 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $31.7 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Polaris Capital Management.

Judging by the fact that Continental Building Products Inc (NYSE:CBPX) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that decided to sell off their positions entirely heading into Q3. Interestingly, Tim David’s Guardian Point Capital dropped the largest stake of the 700 funds watched by Insider Monkey, worth about $16.6 million in stock, and Richard S. Meisenberg’s ACK Asset Management was right behind this move, as the fund said goodbye to about $15.7 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Continental Building Products Inc (NYSE:CBPX). These stocks are Interface, Inc. (NASDAQ:TILE), Kite Realty Group Trust (NYSE:KRG), The Liberty Braves Group (NASDAQ:BATRK), and TriMas Corp (NASDAQ:TRS). This group of stocks’ market valuations match CBPX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TILE 17 96988 -1
KRG 13 32991 1
BATRK 26 405822 3
TRS 16 142267 1
Average 18 169517 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $116 million in CBPX’s case. The Liberty Braves Group (NASDAQ:BATRK) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 13 bullish hedge fund positions. Continental Building Products Inc (NYSE:CBPX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BATRK might be a better candidate to consider a long position.

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

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