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Did Hedge Funds Drop The Ball On US Concrete Inc (USCR) ?

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Abigail Fisher
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about US Concrete Inc (NASDAQ:USCR) in this article.

Is US Concrete Inc (NASDAQ:USCR) a great stock to buy now? The best stock pickers are becoming less confident. The number of bullish hedge fund positions retreated by 1 lately. Our calculations also showed that USCR isn't among the 30 most popular stocks among hedge funds. USCR was in 17 hedge funds' portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with USCR holdings at the end of the previous quarter.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

[caption id="attachment_746830" align="aligncenter" width="473"]

Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital[/caption]

Let's take a peek at the new hedge fund action surrounding US Concrete Inc (NASDAQ:USCR).

How are hedge funds trading US Concrete Inc (NASDAQ:USCR)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in USCR over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

USCR_june2019
USCR_june2019

The largest stake in US Concrete Inc (NASDAQ:USCR) was held by Lomas Capital Management, which reported holding $26 million worth of stock at the end of March. It was followed by GMT Capital with a $16.6 million position. Other investors bullish on the company included ACK Asset Management, Red Cedar Management, and Point72 Asset Management.

Judging by the fact that US Concrete Inc (NASDAQ:USCR) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedge funds who sold off their full holdings in the third quarter. At the top of the heap, Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital dumped the largest position of all the hedgies followed by Insider Monkey, comprising close to $5.6 million in call options, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dumped about $3.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as US Concrete Inc (NASDAQ:USCR) but similarly valued. These stocks are EMC Insurance Group Inc. (NASDAQ:EMCI), Organogenesis Holdings Inc. (NASDAQ:ORGO), Casa Systems, Inc. (NASDAQ:CASA), and Echo Global Logistics, Inc. (NASDAQ:ECHO). This group of stocks' market caps are similar to USCR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EMCI,6,27213,1 ORGO,4,19046,-4 CASA,19,29235,7 ECHO,13,23188,-2 Average,10.5,24671,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $77 million in USCR's case. Casa Systems, Inc. (NASDAQ:CASA) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 4 bullish hedge fund positions. US Concrete Inc (NASDAQ:USCR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on USCR as the stock returned 12.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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