Is IBP A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think Installed Building Products Inc (NYSE:IBP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is IBP a good stock to buy now? Investors who are in the know were cutting their exposure. The number of long hedge fund bets shrunk by 1 lately. Installed Building Products Inc (NYSE:IBP) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that IBP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 go over the latest hedge fund action encompassing Installed Building Products Inc (NYSE:IBP).

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

At the end of September, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IBP over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Installed Building Products Inc (NYSE:IBP) was held by Driehaus Capital, which reported holding $26.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $14.6 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and SG Capital Management. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Installed Building Products Inc (NYSE:IBP), around 2.95% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, designating 2.85 percent of its 13F equity portfolio to IBP.

Judging by the fact that Installed Building Products Inc (NYSE:IBP) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies who sold off their positions entirely in the third quarter. At the top of the heap, Thomas E. Claugus’s GMT Capital cut the largest investment of the 750 funds watched by Insider Monkey, totaling about $14.1 million in stock, and David Brown’s Hawk Ridge Management was right behind this move, as the fund cut about $11.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Installed Building Products Inc (NYSE:IBP) but similarly valued. These stocks are Ormat Technologies, Inc. (NYSE:ORA), Companhia Paranaense de Energia – COPEL (NYSE:ELP), nVent Electric plc (NYSE:NVT), MGIC Investment Corporation (NYSE:MTG), Qurate Retail, Inc. (NASDAQ:QRTEA), M.D.C. Holdings, Inc. (NYSE:MDC), and Braskem SA (NYSE:BAK). This group of stocks’ market caps are closest to IBP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORA 19 198924 0
ELP 6 21608 -6
NVT 34 374896 7
MTG 41 314368 1
QRTEA 41 608143 -2
MDC 25 135497 5
BAK 8 29374 1
Average 24.9 240401 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $116 million in IBP’s case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia – COPEL (NYSE:ELP) is the least popular one with only 6 bullish hedge fund positions. Installed Building Products Inc (NYSE:IBP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBP is 49. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately IBP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IBP investors were disappointed as the stock returned -6.9% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.