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Do Hedge Funds Love Vulcan Materials Company (VMC)?

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Vulcan Materials Company (NYSE:VMC).

Is Vulcan Materials Company (NYSE:VMC) a buy right now? Investors who are in the know were in a pessimistic mood. The number of long hedge fund bets fell by 5 in recent months. Vulcan Materials Company (NYSE:VMC) was in 43 hedge funds' portfolios at the end of June. The all time high for this statistic is 57. Our calculations also showed that VMC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you'd ask most stock holders, hedge funds are viewed as slow, outdated investment vehicles of yesteryear. While there are over 8000 funds trading today, Our experts look at the moguls of this club, around 850 funds. Most estimates calculate that this group of people have their hands on bulk of the smart money's total capital, and by observing their first-class investments, Insider Monkey has found a few investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Joel Greenblatt Gotham Asset Management
Joel Greenblatt Gotham Asset Management

Joel Greenblatt of Gotham Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 we're going to take a peek at the new hedge fund action regarding Vulcan Materials Company (NYSE:VMC).

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

Heading into the third quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. By comparison, 51 hedge funds held shares or bullish call options in VMC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Stockbridge Partners was the largest shareholder of Vulcan Materials Company (NYSE:VMC), with a stake worth $231.2 million reported as of the end of June. Trailing Stockbridge Partners was Holocene Advisors, which amassed a stake valued at $180.8 million. Alkeon Capital Management, Citadel Investment Group, and D E Shaw 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 Park Presidio Capital allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 6.04% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, earmarking 4.92 percent of its 13F equity portfolio to VMC.

Because Vulcan Materials Company (NYSE:VMC) has experienced bearish sentiment from the smart money, logic holds that there was a specific group of funds that elected to cut their entire stakes in the second quarter. Interestingly, John Armitage's Egerton Capital Limited said goodbye to the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $167.3 million in stock, and Louis Bacon's Moore Global Investments was right behind this move, as the fund dumped about $22.7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds in the second quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are United Rentals, Inc. (NYSE:URI), Dollar Tree, Inc. (NASDAQ:DLTR), NovoCure Limited (NASDAQ:NVCR), W.W. Grainger, Inc. (NYSE:GWW), CNH Industrial NV (NYSE:CNHI), Trip.com Group Limited (NASDAQ:TCOM), and MongoDB, Inc. (NASDAQ:MDB). This group of stocks' market caps are similar to VMC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position URI,47,1173038,6 DLTR,42,1379674,1 NVCR,25,500806,3 GWW,29,221218,-1 CNHI,24,680613,1 TCOM,41,1997956,6 MDB,44,1693975,-2 Average,36,1092469,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1092 million. That figure was $1375 million in VMC's case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 24 bullish hedge fund positions. Vulcan Materials Company (NYSE:VMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VMC is 63.9. 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 22.9% in 2021 through October 1st and beat the market again by 5.6 percentage points. Unfortunately VMC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on VMC were disappointed as the stock returned -0.5% since the end of June (through 10/1) 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.