Should You Buy Eagle Materials, Inc. (EXP)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Eagle Materials, Inc. (NYSE:EXP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Eagle Materials, Inc. (NYSE:EXP) undervalued? Prominent investors are becoming hopeful. The number of bullish hedge fund positions improved by 2 in recent months. At the end of this article we will also compare EXP to other stocks including Prosperity Bancshares, Inc. (NYSE:PB), Youku Tudou Inc (ADR) (NYSE:YOKU), and Techne Corporation (NASDAQ:TECH) to get a better sense of its popularity.

Follow Eagle Materials Inc (NYSE:EXP)

To most traders, hedge funds are perceived as slow, old financial vehicles of the past. While there are greater than 8000 funds trading at present, We choose to focus on the moguls of this group, approximately 700 funds. These investment experts command bulk of the smart money’s total capital, and by tailing their highest performing equity investments, Insider Monkey has unsheathed various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to review the fresh action surrounding Eagle Materials, Inc. (NYSE:EXP).

What have hedge funds been doing with Eagle Materials, Inc. (NYSE:EXP)?

Heading into Q4, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jeffrey Gates’s Gates Capital Management has the largest position in Eagle Materials, Inc. (NYSE:EXP), worth close to $149.1 million, corresponding to 5.8% of its total 13F portfolio. Sitting at the No. 2 spot is Robert Bishop of Impala Asset Management, with a $104.3 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Martin D. Sass’s MD Sass, David Tepper’s Appaloosa Management LP and Ken Griffin’s Citadel Investment Group.

Now, key money managers were leading the bulls’ herd. Appaloosa Management LP, managed by David Tepper, established a position in Eagle Materials, Inc. (NYSE:EXP). Appaloosa Management LP had $53 million invested in the company at the end of the quarter. Stephen Loukas, David A. Lorber, Zachary George’s FrontFour Capital Group also initiated a $22.4 million position during the quarter. The following funds were also among the new EXP investors: Andre F. Perold’s HighVista Strategies, Benjamin A. Smith’s Laurion Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Eagle Materials, Inc. (NYSE:EXP). We will take a look at Prosperity Bancshares, Inc. (NYSE:PB), Youku Tudou Inc (ADR) (NYSE:YOKU), Techne Corporation (NASDAQ:TECH), and GNC Holdings Inc (NYSE:GNC). This group of stocks’ market caps resemble EXP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PB 16 121516 -1
YOKU 15 339985 -5
TECH 9 186773 -3
GNC 42 1172137 2

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $455 million. That figure was $728 million in EXP’s case. GNC Holdings Inc (NYSE:GNC) is the most popular stock in this table. On the other hand Techne Corporation (NASDAQ:TECH) is the least popular one with only 9 bullish hedge fund positions. Eagle Materials, Inc. (NYSE:EXP) is not the most popular stock in this group, but it has still attracted above average attention from investors. Although this may imply it is a stock worth considering, we’d rather spend our time researching stocks that hedge funds are piling on. In this case, GNC might be a better alternative.