In this article we will take a look at whether hedge funds think Summit Materials Inc (NYSE:SUM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Summit Materials Inc (NYSE:SUM) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. SUM investors should be aware of an increase in hedge fund interest lately. There were 23 hedge funds in our database with SUM holdings at the end of June. Our calculations also showed that SUM 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.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mason Hawkins of Southeastern Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 look at the new hedge fund action surrounding Summit Materials Inc (NYSE:SUM).
Do Hedge Funds Think SUM Is A Good Stock To Buy Now?
At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in SUM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Summit Materials Inc (NYSE:SUM), with a stake worth $55.3 million reported as of the end of September. Trailing Adage Capital Management was Wallace R. Weitz & Co., which amassed a stake valued at $28.5 million. Millennium Management, GMT Capital, and Lodge Hill 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 Cobalt Capital Management allocated the biggest weight to Summit Materials Inc (NYSE:SUM), around 4.69% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, earmarking 3.54 percent of its 13F equity portfolio to SUM.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Renaissance Technologies, created the largest position in Summit Materials Inc (NYSE:SUM). Renaissance Technologies had $11.5 million invested in the company at the end of the quarter. Wayne Cooperman’s Cobalt Capital Management also initiated a $8.3 million position during the quarter. The other funds with brand new SUM positions are Mason Hawkins’s Southeastern Asset Management, Louis Bacon’s Moore Global Investments, and Greg Eisner’s Engineers Gate Manager.
Let’s now take a look at hedge fund activity in other stocks similar to Summit Materials Inc (NYSE:SUM). These stocks are Shutterstock Inc (NYSE:SSTK), Bottomline Technologies (de), Inc (NASDAQ:EPAY), 21Vianet Group Inc (NASDAQ:VNET), Asbury Automotive Group, Inc. (NYSE:ABG), First Hawaiian, Inc. (NASDAQ:FHB), Daqo New Energy Corp (NYSE:DQ), and Comfort Systems USA, Inc. (NYSE:FIX). This group of stocks’ market values resemble SUM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSTK | 19 | 130847 | 3 |
| EPAY | 21 | 123308 | 3 |
| VNET | 24 | 378434 | 5 |
| ABG | 28 | 461893 | 4 |
| FHB | 23 | 107462 | 2 |
| DQ | 18 | 109173 | 7 |
| FIX | 24 | 74498 | 2 |
| Average | 22.4 | 197945 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $198 million in SUM’s case. Asbury Automotive Group, Inc. (NYSE:ABG) is the most popular stock in this table. On the other hand Daqo New Energy Corp (NYSE:DQ) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Summit Materials Inc (NYSE:SUM) is more popular among hedge funds. Our overall hedge fund sentiment score for SUM is 86.6. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on SUM as the stock returned 18.3% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
