Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Valmont Industries, Inc. (NYSE:VMI).
Is Valmont Industries, Inc. (NYSE:VMI) a splendid investment today? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions rose by 1 in recent months. Our calculations also showed that vmi isn't among the 30 most popular stocks among hedge funds.
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.
We're going to take a peek at the fresh hedge fund action encompassing Valmont Industries, Inc. (NYSE:VMI).
How are hedge funds trading Valmont Industries, Inc. (NYSE:VMI)?
At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in VMI a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Impax Asset Management was the largest shareholder of Valmont Industries, Inc. (NYSE:VMI), with a stake worth $95.7 million reported as of the end of March. Trailing Impax Asset Management was Royce & Associates, which amassed a stake valued at $67.4 million. Nitorum Capital, Citadel Investment Group, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were breaking ground themselves. First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, created the biggest position in Valmont Industries, Inc. (NYSE:VMI). First Pacific Advisors LLC had $3.5 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $3.1 million position during the quarter. The other funds with brand new VMI positions are Paul Tudor Jones's Tudor Investment Corp, Matthew Hulsizer's PEAK6 Capital Management, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's check out hedge fund activity in other stocks similar to Valmont Industries, Inc. (NYSE:VMI). These stocks are Holly Energy Partners, L.P. (NYSE:HEP), Canada Goose Holdings Inc. (NYSE:GOOS), Proto Labs Inc (NYSE:PRLB), and Cosan Limited (NYSE:CZZ). This group of stocks' market caps are similar to VMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HEP,4,2658,2 GOOS,27,122294,-2 PRLB,11,24095,1 CZZ,16,141039,-2 Average,14.5,72522,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $235 million in VMI's case. Canada Goose Holdings Inc. (NYSE:GOOS) is the most popular stock in this table. On the other hand Holly Energy Partners, L.P. (NYSE:HEP) is the least popular one with only 4 bullish hedge fund positions. Valmont Industries, Inc. (NYSE:VMI) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately VMI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VMI were disappointed as the stock returned -11.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.