Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Martin Marietta Materials, Inc. (NYSE:MLM) was in 40 hedge funds' portfolios at the end of June. MLM has seen an increase in enthusiasm from smart money recently. There were 36 hedge funds in our database with MLM positions at the end of the previous quarter. Our calculations also showed that MLM isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the fresh hedge fund action surrounding Martin Marietta Materials, Inc. (NYSE:MLM).
What have hedge funds been doing with Martin Marietta Materials, Inc. (NYSE:MLM)?
At Q2's end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in MLM a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Martin Marietta Materials, Inc. (NYSE:MLM), with a stake worth $686.4 million reported as of the end of March. Trailing Select Equity Group was Egerton Capital Limited, which amassed a stake valued at $493.8 million. Gardner Russo & Gardner, Adage Capital Management, and Iridian Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Iridian Asset Management, managed by David Cohen and Harold Levy, created the most outsized position in Martin Marietta Materials, Inc. (NYSE:MLM). Iridian Asset Management had $137.6 million invested in the company at the end of the quarter. Principal Global Investors's Columbus Circle Investors also initiated a $8.2 million position during the quarter. The following funds were also among the new MLM investors: Morris Mark's Mark Asset Management, Ira Unschuld's Brant Point Investment Management, and Sander Gerber's Hudson Bay Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Martin Marietta Materials, Inc. (NYSE:MLM) but similarly valued. These stocks are Western Digital Corporation (NASDAQ:WDC), Cardinal Health, Inc. (NYSE:CAH), Korea Electric Power Corporation (NYSE:KEP), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD). All of these stocks' market caps are similar to MLM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDC,25,500396,-8 CAH,28,764540,2 KEP,7,43572,-3 CRWD,41,343926,41 Average,25.25,413109,8 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $413 million. That figure was $2474 million in MLM's case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 7 bullish hedge fund positions. Martin Marietta Materials, Inc. (NYSE:MLM) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MLM as the stock returned 19.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.