We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Concrete Pumping Holdings, Inc. (NASDAQ:BBCP).
Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) has experienced a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that BBCP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189677" align="aligncenter" width="600"] Jeffrey Altman of Owl Creek Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a gander at the fresh hedge fund action encompassing Concrete Pumping Holdings, Inc. (NASDAQ:BBCP).
What does smart money think about Concrete Pumping Holdings, Inc. (NASDAQ:BBCP)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in BBCP a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, ACK Asset Management was the largest shareholder of Concrete Pumping Holdings, Inc. (NASDAQ:BBCP), with a stake worth $22.9 million reported as of the end of September. Trailing ACK Asset Management was Owl Creek Asset Management, which amassed a stake valued at $12.7 million. Highbridge Capital Management, Islet Management, and Mountain Lake Investment Management 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 ACK Asset Management allocated the biggest weight to Concrete Pumping Holdings, Inc. (NASDAQ:BBCP), around 6.44% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, earmarking 1 percent of its 13F equity portfolio to BBCP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Driehaus Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified BBCP as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) but similarly valued. We will take a look at Trilogy Metals Inc. (NYSEAMERICAN:TMQ), Express, Inc. (NYSE:EXPR), Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), and LCNB Corp. (NASDAQ:LCNB). This group of stocks' market valuations match BBCP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMQ,14,86483,0 EXPR,14,36867,1 MIRM,7,83998,7 LCNB,1,3680,0 Average,9,52757,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $46 million in BBCP's case. Trilogy Metals Inc. (NYSE:TMQ) is the most popular stock in this table. On the other hand LCNB Corp. (NASDAQ:LCNB) is the least popular one with only 1 bullish hedge fund positions. Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BBCP as the stock returned 20.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.