Is US Concrete Inc (NASDAQ:USCR) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is US Concrete Inc (NASDAQ:USCR) a healthy stock for your portfolio? Hedge funds are turning less bullish. The number of bullish hedge fund bets were cut by 2 lately. Our calculations also showed that USCR 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s review the recent hedge fund action regarding US Concrete Inc (NASDAQ:USCR).
What have hedge funds been doing with US Concrete Inc (NASDAQ:USCR)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in USCR over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Lomas Capital Management was the largest shareholder of US Concrete Inc (NASDAQ:USCR), with a stake worth $45.3 million reported as of the end of September. Trailing Lomas Capital Management was GMT Capital, which amassed a stake valued at $18.5 million. Red Cedar Management, Royce & Associates, and SG Capital Management 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 Red Cedar Management allocated the biggest weight to US Concrete Inc (NASDAQ:USCR), around 13.37% of its 13F portfolio. Lomas Capital Management is also relatively very bullish on the stock, designating 4.69 percent of its 13F equity portfolio to USCR.
Seeing as US Concrete Inc (NASDAQ:USCR) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that slashed their full holdings last quarter. Interestingly, Michael O’Keefe’s 12th Street Asset Management sold off the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $1.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as US Concrete Inc (NASDAQ:USCR) but similarly valued. These stocks are Altus Midstream Company (NASDAQ:ALTM), Select Energy Services, Inc. (NYSE:WTTR), Stewart Information Services Corp (NYSE:STC), and Kforce Inc. (NASDAQ:KFRC). All of these stocks’ market caps resemble USCR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALTM | 5 | 6127 | -2 |
| WTTR | 10 | 23231 | -1 |
| STC | 17 | 92374 | 4 |
| KFRC | 19 | 78540 | 1 |
| Average | 12.75 | 50068 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $114 million in USCR’s case. Kforce Inc. (NASDAQ:KFRC) is the most popular stock in this table. On the other hand Altus Midstream Company (NASDAQ:ALTM) is the least popular one with only 5 bullish hedge fund positions. US Concrete Inc (NASDAQ:USCR) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately USCR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on USCR were disappointed as the stock returned -26% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
