Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Beacon Roofing Supply, Inc. (NASDAQ:BECN).
Hedge fund interest in Beacon Roofing Supply, Inc. (NASDAQ:BECN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BECN to other stocks including ProAssurance Corporation (NYSE:PRA), National Vision Holdings, Inc. (NASDAQ:EYE), and Myriad Genetics, Inc. (NASDAQ:MYGN) to get a better sense of its popularity.
In the financial world there are dozens of signals stock market investors use to analyze publicly traded companies. Two of the most innovative signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best investment managers can outpace the market by a superb amount (see the details here).
We're going to review the key hedge fund action regarding Beacon Roofing Supply, Inc. (NASDAQ:BECN).
How are hedge funds trading Beacon Roofing Supply, Inc. (NASDAQ:BECN)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in BECN 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.
More specifically, Southpoint Capital Advisors was the largest shareholder of Beacon Roofing Supply, Inc. (NASDAQ:BECN), with a stake worth $95.2 million reported as of the end of September. Trailing Southpoint Capital Advisors was Adage Capital Management, which amassed a stake valued at $92.8 million. Fisher Asset Management, Millennium Management, and Soapstone Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Beacon Roofing Supply, Inc. (NASDAQ:BECN) has faced a decline in interest from the smart money, we can see that there was a specific group of hedgies who sold off their entire stakes in the third quarter. At the top of the heap, Mariko Gordon's Daruma Asset Management dumped the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $33.8 million in stock, and Ricky Sandler's Eminence Capital was right behind this move, as the fund said goodbye to about $30.2 million worth. These transactions 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 Beacon Roofing Supply, Inc. (NASDAQ:BECN). We will take a look at ProAssurance Corporation (NYSE:PRA), National Vision Holdings, Inc. (NASDAQ:EYE), Myriad Genetics, Inc. (NASDAQ:MYGN), and HB Fuller Co (NYSE:FUL). This group of stocks' market caps are similar to BECN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRA,13,172578,0 EYE,15,340539,-2 MYGN,19,259947,-2 FUL,14,118109,6 Average,15.25,222793,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $356 million in BECN's case. Myriad Genetics, Inc. (NASDAQ:MYGN) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Beacon Roofing Supply, Inc. (NASDAQ:BECN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on BECN, though not to the same extent, as the stock returned 19.3% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.