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Is Beacon Roofing Supply, Inc. (NASDAQ:BECN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Beacon Roofing Supply, Inc. (NASDAQ:BECN) going to take off soon? Money managers were taking a pessimistic view. The number of long hedge fund bets shrunk by 2 in recent months. Beacon Roofing Supply, Inc. (NASDAQ:BECN) was in 21 hedge funds' portfolios at the end of March. The all time high for this statistic is 40. Our calculations also showed that BECN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Brad Farber of Atika Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a look at the key hedge fund action encompassing Beacon Roofing Supply, Inc. (NASDAQ:BECN).
Do Hedge Funds Think BECN Is A Good Stock To Buy Now?
At Q1's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BECN over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Cohen and Harold Levy's Iridian Asset Management has the number one position in Beacon Roofing Supply, Inc. (NASDAQ:BECN), worth close to $136.4 million, comprising 2.3% of its total 13F portfolio. On Iridian Asset Management's heels is Fisher Asset Management, managed by Ken Fisher, which holds a $77.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain Ken Griffin's Citadel Investment Group, Lee Ainslie's Maverick Capital and Charles Paquelet's Skylands Capital. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Beacon Roofing Supply, Inc. (NASDAQ:BECN), around 7.56% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, dishing out 7.36 percent of its 13F equity portfolio to BECN.
Judging by the fact that Beacon Roofing Supply, Inc. (NASDAQ:BECN) has faced falling interest from hedge fund managers, it's easy to see that there is a sect of money managers that elected to cut their entire stakes last quarter. At the top of the heap, Daniel Lascano's Lomas Capital Management cut the largest position of all the hedgies tracked by Insider Monkey, totaling close to $26.5 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $13.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Beacon Roofing Supply, Inc. (NASDAQ:BECN). We will take a look at Cannae Holdings, Inc. (NYSE:CNNE), BRF SA (NYSE:BRFS), Cushman & Wakefield plc (NYSE:CWK), Spectrum Brands Holdings, Inc. (NYSE:SPB), Kirby Corporation (NYSE:KEX), BanColombia S.A. (NYSE:CIB), and Bank of Hawaii Corporation (NYSE:BOH). This group of stocks' market valuations resemble BECN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNNE,36,672726,2 BRFS,8,47746,-3 CWK,19,157185,4 SPB,37,618156,2 KEX,23,632227,1 CIB,3,68988,-1 BOH,15,45660,-2 Average,20.1,320384,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $411 million in BECN's case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BECN is 45.2. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately BECN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BECN were disappointed as the stock returned -0.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.