At Insider Monkey, we pore over the filings of nearly 750 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 June 28. In this article, we will use that wealth of knowledge to determine whether or not TopBuild Corp (NYSE:BLD) makes for a good investment right now.
TopBuild Corp (NYSE:BLD) has experienced a decrease in activity from the world's largest hedge funds of late. BLD was in 14 hedge funds' portfolios at the end of June. There were 17 hedge funds in our database with BLD holdings at the end of the previous quarter. Our calculations also showed that BLD 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Let's take a look at the latest hedge fund action encompassing TopBuild Corp (NYSE:BLD).
What does smart money think about TopBuild Corp (NYSE:BLD)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the first quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in BLD a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Millennium Management, managed by Israel Englander, holds the biggest position in TopBuild Corp (NYSE:BLD). Millennium Management has a $26.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by David Brown of Hawk Ridge Management, with a $18.4 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Richard S. Meisenberg's ACK Asset Management, Clint Murray's Lodge Hill Capital and Matthew Hulsizer's PEAK6 Capital Management.
Since TopBuild Corp (NYSE:BLD) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there exists a select few hedge funds who were dropping their full holdings last quarter. Interestingly, Phill Gross and Robert Atchinson's Adage Capital Management sold off the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $49.3 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund said goodbye to about $8.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as TopBuild Corp (NYSE:BLD) but similarly valued. These stocks are Washington Federal Inc. (NASDAQ:WAFD), Agios Pharmaceuticals Inc (NASDAQ:AGIO), AVX Corporation (NYSE:AVX), and Tenable Holdings, Inc. (NASDAQ:TENB). All of these stocks' market caps match BLD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAFD,9,59821,-6 AGIO,18,130908,-4 AVX,11,80537,0 TENB,17,146916,-3 Average,13.75,104546,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $112 million in BLD's case. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the most popular stock in this table. On the other hand Washington Federal Inc. (NASDAQ:WAFD) is the least popular one with only 9 bullish hedge fund positions. TopBuild Corp (NYSE:BLD) is not the most popular stock in this group but hedge fund interest is still above average. 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 BLD as the stock returned 16.5% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.