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Do Hedge Funds Love Martin Marietta Materials, Inc. (MLM)?

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At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Martin Marietta Materials, Inc. (NYSE:MLM) makes for a good investment right now.

Martin Marietta Materials, Inc. (NYSE:MLM) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 41 hedge funds' portfolios at the end of March. Our calculations also showed that MLM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as West Pharmaceutical Services Inc. (NYSE:WST), Lyft, Inc. (NASDAQ:LYFT), and Ameren Corporation (NYSE:AEE) to gather more data points.

Today there are plenty of gauges shareholders employ to assess publicly traded companies. A pair of the less utilized gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best investment managers can beat the market by a healthy margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Charles Davidson - Wexford Capital
Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Now let's take a look at the latest hedge fund action surrounding Martin Marietta Materials, Inc. (NYSE:MLM).

Do Hedge Funds Think MLM Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MLM over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Robert Joseph Caruso's Select Equity Group has the largest position in Martin Marietta Materials, Inc. (NYSE:MLM), worth close to $1.0071 billion, comprising 3.7% of its total 13F portfolio. The second most bullish fund manager is Tom Russo of Gardner Russo & Gardner, with a $426.7 million position; 3.9% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Panayotis Takis Sparaggis's Alkeon Capital Management, John Armitage's Egerton Capital Limited and Seth Rosen's Nitorum Capital. In terms of the portfolio weights assigned to each position Gardner Russo & Gardner allocated the biggest weight to Martin Marietta Materials, Inc. (NYSE:MLM), around 3.89% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, dishing out 3.66 percent of its 13F equity portfolio to MLM.

Judging by the fact that Martin Marietta Materials, Inc. (NYSE:MLM) has experienced falling interest from the smart money, it's safe to say that there exists a select few hedgies that slashed their full holdings in the first quarter. Intriguingly, David Cohen and Harold Levy's Iridian Asset Management cut the largest stake of all the hedgies followed by Insider Monkey, totaling close to $57.4 million in stock. Jos Shaver's fund, Electron Capital Partners, also said goodbye to its stock, about $28 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Martin Marietta Materials, Inc. (NYSE:MLM) but similarly valued. We will take a look at West Pharmaceutical Services Inc. (NYSE:WST), Lyft, Inc. (NASDAQ:LYFT), Ameren Corporation (NYSE:AEE), Energy Transfer L.P. (NYSE:ET), Qorvo Inc (NASDAQ:QRVO), ORIX Corporation (NYSE:IX), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). This group of stocks' market values are closest to MLM's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WST,26,419487,-8 LYFT,60,1954603,8 AEE,19,266021,0 ET,25,647725,0 QRVO,41,2329699,-10 IX,5,4886,2 HZNP,48,4177404,-7 Average,32,1399975,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1400 million. That figure was $1951 million in MLM's case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 5 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 overall hedge fund sentiment score for MLM is 61.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately MLM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MLM were disappointed as the stock returned 0% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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