We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Continental Building Products Inc (NYSE:CBPX).
Hedge fund interest in Continental Building Products Inc (NYSE:CBPX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seacor Holdings, Inc. (NYSE:CKH), AnaptysBio, Inc. (NASDAQ:ANAB), and Urstadt Biddle Properties Inc (NYSE:UBA) to gather more data points. Our calculations also showed that CBPX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the recent hedge fund action encompassing Continental Building Products Inc (NYSE:CBPX).
How are hedge funds trading Continental Building Products Inc (NYSE:CBPX)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CBPX over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Continental Building Products Inc (NYSE:CBPX). Millennium Management has a $28.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by D E Shaw, led by David E. Shaw, holding a $24.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism consist of Mark Coe’s Intrinsic Edge Capital, Renaissance Technologies and Bernard Horn’s Polaris Capital Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Continental Building Products Inc (NYSE:CBPX), around 0.61% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to CBPX.
Due to the fact that Continental Building Products Inc (NYSE:CBPX) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes last quarter. Interestingly, Steve Pei’s Gratia Capital dumped the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $2.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Continental Building Products Inc (NYSE:CBPX). These stocks are Seacor Holdings, Inc. (NYSE:CKH), AnaptysBio, Inc. (NASDAQ:ANAB), Urstadt Biddle Properties Inc (NYSE:UBA), and So-Young International Inc. (NASDAQ:SY). All of these stocks’ market caps are similar to CBPX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CKH | 13 | 145440 | -1 |
| ANAB | 15 | 329233 | -1 |
| UBA | 11 | 36367 | 3 |
| SY | 2 | 31447 | -3 |
| Average | 10.25 | 135622 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $82 million in CBPX’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Continental Building Products Inc (NYSE:CBPX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CBPX as the stock returned 34.8% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.
