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Were Hedge Funds Right About Souring On Vulcan Materials Company (VMC)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Vulcan Materials Company (NYSE:VMC) and determine whether hedge funds skillfully traded this stock.

Is Vulcan Materials Company (NYSE:VMC) a buy here? The best stock pickers were in a bearish mood. The number of bullish hedge fund bets fell by 3 in recent months. Our calculations also showed that VMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). VMC was in 49 hedge funds’ portfolios at the end of March. There were 52 hedge funds in our database with VMC holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are dozens of metrics market participants employ to analyze their stock investments. A pair of the most useful metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outperform the market by a significant amount (see the details here).

CAPITAL GROWTH MANAGEMENT

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action surrounding Vulcan Materials Company (NYSE:VMC).

What does smart money think about Vulcan Materials Company (NYSE:VMC)?

At Q1’s end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 48 hedge funds with a bullish position in VMC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VMC A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, John Armitage’s Egerton Capital Limited has the number one position in Vulcan Materials Company (NYSE:VMC), worth close to $196.5 million, amounting to 2% of its total 13F portfolio. The second most bullish fund manager is Eminence Capital, led by Ricky Sandler, holding a $148 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Ken Griffin’s Citadel Investment Group and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Red Cedar Management allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 5.92% of its 13F portfolio. Lomas Capital Management is also relatively very bullish on the stock, dishing out 5.71 percent of its 13F equity portfolio to VMC.

Judging by the fact that Vulcan Materials Company (NYSE:VMC) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few funds that decided to sell off their entire stakes by the end of the first quarter. At the top of the heap, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling close to $151.3 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $34 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Vulcan Materials Company (NYSE:VMC). These stocks are Boston Properties, Inc. (NYSE:BXP), Garmin Ltd. (NASDAQ:GRMN), Conagra Brands, Inc. (NYSE:CAG), and First Republic Bank (NYSE:FRC). This group of stocks’ market valuations resemble VMC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BXP 29 185266 9
GRMN 27 394058 1
CAG 30 538429 1
FRC 28 916056 1
Average 28.5 508452 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $508 million. That figure was $1119 million in VMC’s case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Garmin Ltd. (NASDAQ:GRMN) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Vulcan Materials Company (NYSE:VMC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately VMC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VMC were disappointed as the stock returned 7.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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