Was The Smart Money Right About Builders FirstSource, Inc. (BLDR)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Builders FirstSource, Inc. (NYSE:BLDR) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Builders FirstSource, Inc. (NYSE:BLDR) has experienced a decrease in hedge fund sentiment of late. Builders FirstSource, Inc. (NYSE:BLDR) was in 53 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 60. Our calculations also showed that BLDR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Builders FirstSource, Inc. (NYSE:BLDR).

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

At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the second quarter of 2021. On the other hand, there were a total of 38 hedge funds with a bullish position in BLDR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Coliseum Capital, managed by Christopher Shackelton and Adam Gray, holds the number one position in Builders FirstSource, Inc. (NYSE:BLDR). Coliseum Capital has a $460.6 million position in the stock, comprising 40.9% of its 13F portfolio. The second largest stake is held by Robert Pohly of Samlyn Capital, with a $193.7 million position; 2.6% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Christian Leone’s Luxor Capital Group, Parag Vora’s HG Vora Capital Management and Malcolm Levine’s Dendur Capital. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Builders FirstSource, Inc. (NYSE:BLDR), around 40.89% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, setting aside 19.85 percent of its 13F equity portfolio to BLDR.

Seeing as Builders FirstSource, Inc. (NYSE:BLDR) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who were dropping their full holdings last quarter. Intriguingly, Gregg Moskowitz’s Interval Partners sold off the largest position of all the hedgies followed by Insider Monkey, valued at close to $27.9 million in stock. Stanley Druckenmiller’s fund, Duquesne Capital, also dumped its stock, about $24.2 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Builders FirstSource, Inc. (NYSE:BLDR) but similarly valued. These stocks are American Financial Group, Inc. (NYSE:AFG), Henry Schein, Inc. (NASDAQ:HSIC), Dicks Sporting Goods Inc (NYSE:DKS), GDS Holdings Limited (NASDAQ:GDS), Cemex SAB de CV (NYSE:CX), Ozon Holdings PLC (NASDAQ:OZON), and Regal Beloit Corporation (NYSE:RBC). All of these stocks’ market caps are similar to BLDR’s market cap.

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As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $789 million. That figure was $2213 million in BLDR’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Ozon Holdings PLC (NASDAQ:OZON) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Builders FirstSource, Inc. (NYSE:BLDR) is more popular among hedge funds. Our overall hedge fund sentiment score for BLDR is 74.5. 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 returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on BLDR as the stock returned 31.4% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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