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Hedge Funds Are Selling Vulcan Materials Company (VMC)

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·6 min read
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In this article we will take a look at whether hedge funds think Vulcan Materials Company (NYSE:VMC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Vulcan Materials Company (NYSE:VMC) was in 49 hedge funds' portfolios at the end of the first quarter of 2020. VMC shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 52 hedge funds in our database with VMC positions at the end of the previous quarter. Our calculations also showed that VMC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_670753" align="aligncenter" width="400"]

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton Capital[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a peek at the key hedge fund action regarding Vulcan Materials Company (NYSE:VMC).

How have hedgies been trading Vulcan Materials Company (NYSE:VMC)?

At Q1's end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VMC over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VMC A Good Stock To Buy?
Is VMC A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Egerton Capital Limited, managed by John Armitage, holds the biggest position in Vulcan Materials Company (NYSE:VMC). Egerton Capital Limited has a $196.5 million position in the stock, comprising 2% of its 13F portfolio. On Egerton Capital Limited's heels is Eminence Capital, led by Ricky Sandler, holding a $148 million position; 1.6% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Phill Gross and Robert Atchinson's Adage Capital Management, Ken Griffin's Citadel Investment Group and Panayotis Takis Sparaggis's Alkeon Capital Management. In terms of the portfolio weights assigned to each position Red Cedar Management allocated the biggest weight to Vulcan Materials Company (NYSE:VMC), around 5.92% of its 13F portfolio. Lomas Capital Management is also relatively very bullish on the stock, setting aside 5.71 percent of its 13F equity portfolio to VMC.

Because Vulcan Materials Company (NYSE:VMC) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few fund managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Andrew Immerman and Jeremy Schiffman's Palestra Capital Management dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $151.3 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $34 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are Boston Properties, Inc. (NYSE:BXP), Garmin Ltd. (NASDAQ:GRMN), Conagra Brands, Inc. (NYSE:CAG), and First Republic Bank (NYSE:FRC). 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 BXP,29,185266,9 GRMN,27,394058,1 CAG,30,538429,1 FRC,28,916056,1 Average,28.5,508452,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $508 million. That figure was $1119 million in VMC's case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Garmin Ltd. (NASDAQ:GRMN) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Vulcan Materials Company (NYSE:VMC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately VMC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on VMC were disappointed as the stock returned -7.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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