At Insider Monkey, we pore over the filings of nearly 817 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 September 30. In this article, we will use that wealth of knowledge to determine whether or not Vulcan Materials Company (NYSE:VMC) makes for a good investment right now.
Is VMC a good stock to buy now? Vulcan Materials Company (NYSE:VMC) was in 42 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 57. VMC has experienced a decrease in enthusiasm from smart money in recent months. There were 51 hedge funds in our database with VMC positions at the end of the second quarter. Our calculations also showed that VMC 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.
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 15 best blue chip stocks to buy 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 surrounding Vulcan Materials Company (NYSE:VMC).
Do Hedge Funds Think VMC Is A Good Stock To Buy Now?
At the end of September, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VMC over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Egerton Capital Limited was the largest shareholder of Vulcan Materials Company (NYSE:VMC), with a stake worth $332.5 million reported as of the end of September. Trailing Egerton Capital Limited was Theleme Partners, which amassed a stake valued at $146.7 million. Stockbridge Partners, D E Shaw, and Alkeon Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Theleme Partners allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 6.74% of its 13F portfolio. Park Presidio Capital is also relatively very bullish on the stock, dishing out 6.13 percent of its 13F equity portfolio to VMC.
Seeing as Vulcan Materials Company (NYSE:VMC) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of hedge funds who were dropping their entire stakes heading into Q4. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $38.6 million in stock, and Joe Milano’s Greenhouse Funds was right behind this move, as the fund dropped about $23.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 9 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are Palantir Technologies Inc. (NYSE:PLTR), Rollins, Inc. (NYSE:ROL), Discover Financial Services (NYSE:DFS), Valero Energy Corporation (NYSE:VLO), Coca-Cola European Partners plc (NYSE:CCEP), CMS Energy Corporation (NYSE:CMS), and CGI Inc. (NYSE:GIB). This group of stocks’ market caps match VMC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $529 million. That figure was $1331 million in VMC’s case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 20 bullish hedge fund positions. Vulcan Materials Company (NYSE:VMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VMC is 58.8. 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. This is a slightly positive signal but 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 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately VMC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VMC were disappointed as the stock returned 6.8% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.