At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Construction Partners, Inc. (NASDAQ:ROAD) makes for a good investment right now.
Is Construction Partners, Inc. (NASDAQ:ROAD) the right investment to pursue these days? Investors who are in the know are becoming hopeful. The number of bullish hedge fund bets improved by 5 in recent months. Our calculations also showed that ROAD 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Chuck Royce of Royce & Associates
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. Let’s check out the new hedge fund action surrounding Construction Partners, Inc. (NASDAQ:ROAD).
Hedge fund activity in Construction Partners, Inc. (NASDAQ:ROAD)
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 83% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ROAD over the last 17 quarters. 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, Royce & Associates held the most valuable stake in Construction Partners, Inc. (NASDAQ:ROAD), which was worth $13.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.6 million worth of shares. Laurion Capital Management, Arrowstreet Capital, and Citadel Investment Group 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 Royce & Associates allocated the biggest weight to Construction Partners, Inc. (NASDAQ:ROAD), around 0.12% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to ROAD.
As aggregate interest increased, key hedge funds have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the most outsized position in Construction Partners, Inc. (NASDAQ:ROAD). Laurion Capital Management had $1.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new ROAD investors: Jeffrey Talpins’s Element Capital Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Construction Partners, Inc. (NASDAQ:ROAD) but similarly valued. We will take a look at Omeros Corporation (NASDAQ:OMER), Oil States International, Inc. (NYSE:OIS), Dova Pharmaceuticals, Inc. (NASDAQ:DOVA), and Tactile Systems Technology, Inc. (NASDAQ:TCMD). This group of stocks’ market caps are closest to ROAD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMER | 6 | 86938 | -2 |
| OIS | 12 | 39976 | 3 |
| DOVA | 12 | 165203 | 3 |
| TCMD | 10 | 25776 | -5 |
| Average | 10 | 79473 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $21 million in ROAD’s case. Oil States International, Inc. (NYSE:OIS) is the most popular stock in this table. On the other hand Omeros Corporation (NASDAQ:OMER) is the least popular one with only 6 bullish hedge fund positions. Construction Partners, Inc. (NASDAQ:ROAD) is not the most popular stock in this group but hedge fund interest is still above average. 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 ROAD as the stock returned 27.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
