Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Foundation Building Materials, Inc. (NYSE:FBM).
Is Foundation Building Materials, Inc. (NYSE:FBM) a buy, sell, or hold? Prominent investors are becoming hopeful. The number of long hedge fund bets inched up by 2 lately. Our calculations also showed that FBM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at present, We hone in on the crème de la crème of this group, around 750 funds. These hedge fund managers direct most of the smart money's total asset base, and by tailing their first-class picks, Insider Monkey has unsheathed numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to take a peek at the latest hedge fund action surrounding Foundation Building Materials, Inc. (NYSE:FBM).
How have hedgies been trading Foundation Building Materials, Inc. (NYSE:FBM)?
Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the first quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in FBM a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Foundation Building Materials, Inc. (NYSE:FBM) was held by Renaissance Technologies, which reported holding $9.5 million worth of stock at the end of March. It was followed by Millennium Management with a $7.2 million position. Other investors bullish on the company included GLG Partners, D E Shaw, and Citadel Investment Group.
Now, key hedge funds were leading the bulls' herd. GLG Partners, managed by Noam Gottesman, established the largest position in Foundation Building Materials, Inc. (NYSE:FBM). GLG Partners had $3.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt's Gotham Asset Management, Minhua Zhang's Weld Capital Management, and Cliff Asness's AQR Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Foundation Building Materials, Inc. (NYSE:FBM) but similarly valued. These stocks are Realogy Holdings Corp (NYSE:RLGY), Community Trust Bancorp, Inc. (NASDAQ:CTBI), Organogenesis Holdings Inc. (NASDAQ:ORGO), and Kimbell Royalty Partners (NYSE:KRP). This group of stocks' market values resemble FBM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RLGY,24,299862,-4 CTBI,6,19594,-2 ORGO,2,328,-2 KRP,5,17409,0 Average,9.25,84298,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $27 million in FBM's case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 2 bullish hedge fund positions. Foundation Building Materials, Inc. (NYSE:FBM) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately FBM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FBM were disappointed as the stock returned -12.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.