Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Construction Partners, Inc. (NASDAQ:ROAD) to find out whether there were any major changes in hedge funds’ views.
Construction Partners, Inc. (NASDAQ:ROAD) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ROAD has seen an increase in enthusiasm from smart money of late. There were 10 hedge funds in our database with ROAD positions at the end of the second quarter. Our calculations also showed that ROAD 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.
Today there are a large number of methods investors use to assess publicly traded companies. Some of the less known methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a superb amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s check out the recent hedge fund action surrounding Construction Partners, Inc. (NASDAQ:ROAD).
Do Hedge Funds Think ROAD Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in ROAD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Construction Partners, Inc. (NASDAQ:ROAD), which was worth $17.2 million at the end of the third quarter. On the second spot was Islet Management which amassed $8.6 million worth of shares. Intrinsic Edge Capital, D E Shaw, and Renaissance Technologies 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 Islet Management allocated the biggest weight to Construction Partners, Inc. (NASDAQ:ROAD), around 0.59% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.31 percent of its 13F equity portfolio to ROAD.
Consequently, some big names were breaking ground themselves. Islet Management, managed by Joseph Samuels, initiated the largest position in Construction Partners, Inc. (NASDAQ:ROAD). Islet Management had $8.6 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $3.1 million position during the quarter. The other funds with brand new ROAD positions are D. E. Shaw’s D E Shaw, Renaissance Technologies, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now review hedge fund activity in other stocks similar to Construction Partners, Inc. (NASDAQ:ROAD). We will take a look at Vocera Communications Inc (NYSE:VCRA), PetIQ, Inc. (NASDAQ:PETQ), Retrophin Inc (NASDAQ:RTRX), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Theravance Biopharma Inc (NASDAQ:TBPH), Accel Entertainment, Inc. (NYSE:ACEL), and Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC). This group of stocks’ market values match ROAD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VCRA | 18 | 181990 | 3 |
| PETQ | 13 | 132362 | -3 |
| RTRX | 24 | 370363 | -2 |
| PHAT | 6 | 375079 | 1 |
| TBPH | 17 | 291643 | -1 |
| ACEL | 19 | 180025 | 3 |
| TRHC | 9 | 10137 | 1 |
| Average | 15.1 | 220228 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $36 million in ROAD’s case. Retrophin Inc (NASDAQ:RTRX) is the most popular stock in this table. On the other hand Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is the least popular one with only 6 bullish hedge fund positions. Construction Partners, Inc. (NASDAQ:ROAD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ROAD is 49.9. 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 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 still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ROAD as the stock returned 61.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
