Is Vulcan Materials Company (VMC) Going to Burn These Hedge Funds?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Vulcan Materials Company (NYSE:VMC)? The smart money sentiment can provide an answer to this question.

Hedge fund interest in Vulcan Materials Company (NYSE:VMC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VMC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare VMC to other stocks including Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Dover Corporation (NYSE:DOV), and Zillow Group Inc (NASDAQ:Z) to get a better sense of its popularity.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a glance at the recent 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 the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VMC over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is VMC A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Vulcan Materials Company (NYSE:VMC), with a stake worth $302.9 million reported as of the end of September. Trailing Citadel Investment Group was Holocene Advisors, which amassed a stake valued at $248.6 million. Stockbridge Partners, Alkeon Capital Management, and Egerton Capital Limited 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 Park Presidio Capital allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 6.16% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, designating 4.8 percent of its 13F equity portfolio to VMC.

Since Vulcan Materials Company (NYSE:VMC) has experienced bearish sentiment from the smart money, logic holds that there exists a select few funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Paul Tudor Jones’s Tudor Investment Corp dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $4.7 million in call options. Israel Englander’s fund, Millennium Management, also said goodbye to its call options, about $3.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Vulcan Materials Company (NYSE:VMC). We will take a look at Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Dover Corporation (NYSE:DOV), Zillow Group Inc (NASDAQ:Z), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Xylem Inc (NYSE:XYL), Hormel Foods Corporation (NYSE:HRL), and Imperial Oil Limited (NYSE:IMO). This group of stocks’ market values resemble VMC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALNY 40 1030395 7
DOV 32 351286 3
Z 67 4251493 -9
MPWR 28 799034 -6
XYL 22 821321 -1
HRL 29 476824 5
IMO 10 99009 -5
Average 32.6 1118480 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $1118 million. That figure was $1923 million in VMC’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 10 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 56.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on VMC as the stock returned 13.5% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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