While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Martin Marietta Materials, Inc. (NYSE:MLM).
Is MLM a good stock to buy? Martin Marietta Materials, Inc. (NYSE:MLM) has experienced a decrease in activity from the world's largest hedge funds lately. Martin Marietta Materials, Inc. (NYSE:MLM) was in 38 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 52. There were 51 hedge funds in our database with MLM positions at the end of the second quarter. Our calculations also showed that MLM isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Armitage of Egerton Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a glance at the key hedge fund action surrounding Martin Marietta Materials, Inc. (NYSE:MLM).
Do Hedge Funds Think MLM Is A Good Stock To Buy Now?
At Q3's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2020. By comparison, 43 hedge funds held shares or bullish call options in MLM 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.
Among these funds, Select Equity Group held the most valuable stake in Martin Marietta Materials, Inc. (NYSE:MLM), which was worth $804.2 million at the end of the third quarter. On the second spot was Gardner Russo & Gardner which amassed $353.3 million worth of shares. Egerton Capital Limited, Iridian Asset Management, and Nitorum Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Martin Marietta Materials, Inc. (NYSE:MLM), around 9.35% of its 13F portfolio. Lafitte Capital Management is also relatively very bullish on the stock, setting aside 5.06 percent of its 13F equity portfolio to MLM.
Judging by the fact that Martin Marietta Materials, Inc. (NYSE:MLM) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few hedgies that decided to sell off their positions entirely by the end of the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management dumped the largest position of the 750 funds tracked by Insider Monkey, valued at an estimated $25.9 million in stock, and Mark Coe's Intrinsic Edge Capital was right behind this move, as the fund sold off about $14 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 13 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 Martin Marietta Materials, Inc. (NYSE:MLM) but similarly valued. These stocks are Campbell Soup Company (NYSE:CPB), Healthpeak Properties, Inc. (NYSE:PEAK), Energy Transfer L.P. (NYSE:ET), Li Auto Inc. (NASDAQ:LI), ArcelorMittal (NYSE:MT), Bilibili Inc. (NASDAQ:BILI), and Masco Corporation (NYSE:MAS). This group of stocks' market caps are similar to MLM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPB,28,533547,-4 PEAK,22,290836,-1 ET,31,427313,0 LI,26,256910,26 MT,20,309854,1 BILI,37,1023597,8 MAS,46,878967,6 Average,30,531575,5.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was $1934 million in MLM's case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 20 bullish hedge fund positions. Martin Marietta Materials, Inc. (NYSE:MLM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MLM is 48.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on MLM as the stock returned 17.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Martin Marietta Materials Inc (NYSE:MLM)
Disclosure: None. This article was originally published at Insider Monkey.