Is The Ceiling About to Fall On Beacon Roofing Supply, Inc. (BECN)?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index has gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Beacon Roofing Supply, Inc. (NASDAQ:BECN).

Is Beacon Roofing an exceptional investment right now? Prominent investors are becoming less confident. The number of long hedge fund positions were cut by 7 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MFA Financial, Inc. (NYSE:MFA), Primerica, Inc. (NYSE:PRI), and AMC Entertainment Holdings Inc (NYSE:AMC) to gather more data points.

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 dcwcreations/Shutterstock.com

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What have hedge funds been doing with Beacon Roofing Supply, Inc. (NASDAQ:BECN)?

Heading into the fourth quarter of 2016, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, an 18% fall from the previous quarter. The decrease represents a quick turnaround from Q2, when hedge fund ownership shot up by 30%. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

BECN
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Beacon Roofing Supply, Inc. (NASDAQ:BECN). Fisher Asset Management has a $72.4 million position in the stock. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $71 million position. Other professional money managers with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Mariko Gordon’s Daruma Asset Management, and Israel Englander’s Millennium Management.

Because Beacon Roofing Supply, Inc. (NASDAQ:BECN) has experienced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Eduardo Abush’s Waterfront Capital Partners dumped the biggest position of the 700 funds tracked by Insider Monkey, worth close to $15 million in stock. Mark Kingdon’s fund, Kingdon Capital, also dumped its stock, about $8.2 million worth. These moves are interesting, as total hedge fund interest was cut by 7 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Beacon Roofing Supply, Inc. (NASDAQ:BECN). We will take a look at MFA Financial, Inc. (NYSE:MFA), Primerica, Inc. (NYSE:PRI), AMC Entertainment Holdings Inc (NYSE:AMC), and Choice Hotels International, Inc. (NYSE:CHH). This group of stocks’ market caps are similar to BECN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MFA 11 54202 -1
PRI 17 256653 5
AMC 15 133907 -1
CHH 15 110466 7

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $429 million in BECN’s case. Primerica, Inc. (NYSE:PRI) is the most popular stock in this table. On the other hand MFA Financial, Inc. (NYSE:MFA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Beacon Roofing Supply, Inc. (NASDAQ:BECN) is more popular among hedge funds and has a lot more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio despite recent slide in hedge fund ownership.

Disclosure: None