Is Vulcan Materials Company (NYSE:VMC) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Vulcan Materials Company (NYSE:VMC) was in 52 hedge funds' portfolios at the end of June. VMC investors should be aware of an increase in activity from the world's largest hedge funds in recent months. There were 48 hedge funds in our database with VMC holdings at the end of the previous quarter. Our calculations also showed that VMC 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.
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.
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 review the latest hedge fund action encompassing Vulcan Materials Company (NYSE:VMC).
What have hedge funds been doing with Vulcan Materials Company (NYSE:VMC)?
At the end of the second quarter, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in VMC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Egerton Capital Limited was the largest shareholder of Vulcan Materials Company (NYSE:VMC), with a stake worth $555.9 million reported as of the end of March. Trailing Egerton Capital Limited was Eminence Capital, which amassed a stake valued at $211.4 million. Adage Capital Management, Palestra Capital Management, and Alkeon Capital 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. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, initiated the most outsized position in Vulcan Materials Company (NYSE:VMC). Palestra Capital Management had $142.6 million invested in the company at the end of the quarter. George Soros's Soros Fund Management also initiated a $31.6 million position during the quarter. The other funds with new positions in the stock are Andrew Sandler's Sandler Capital Management, Robert Bishop's Impala Asset Management, and Sara Nainzadeh's Centenus Global Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are AmerisourceBergen Corporation (NYSE:ABC), Cheniere Energy, Inc. (NYSEAMEX:LNG), KeyCorp (NYSE:KEY), and Restaurant Brands International Inc (NYSE:QSR). This group of stocks' market valuations are closest to VMC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABC,36,624583,8 LNG,43,4383992,-10 KEY,31,931275,-1 QSR,39,3041086,2 Average,37.25,2245234,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $2245 million. That figure was $2029 million in VMC's case. Cheniere Energy, Inc. (NYSEAMEX:LNG) is the most popular stock in this table. On the other hand KeyCorp (NYSE:KEY) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Vulcan Materials Company (NYSE:VMC) is more popular among hedge funds. 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 VMC as the stock returned 10.4% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.