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 32 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. SUM has seen an increase in hedge fund interest in recent months. There were 31 hedge funds in our database with SUM holdings at the end of December. Our calculations also showed that SUM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 we’re going to take a glance at the latest hedge fund action regarding Summit Materials Inc (NYSE:SUM).
Do Hedge Funds Think SUM Is A Good Stock To Buy Now?
At the end of March, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SUM over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Maverick Capital held the most valuable stake in Summit Materials Inc (NYSE:SUM), which was worth $37 million at the end of the fourth quarter. On the second spot was Wallace R. Weitz & Co. which amassed $36.4 million worth of shares. Adage Capital Management, DG Capital Management, and Electron Capital Partners 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 DG Capital Management allocated the biggest weight to Summit Materials Inc (NYSE:SUM), around 4.27% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 2.86 percent of its 13F equity portfolio to SUM.
As one would reasonably expect, key money managers have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, assembled the most valuable position in Summit Materials Inc (NYSE:SUM). Maverick Capital had $37 million invested in the company at the end of the quarter. Jos Shaver’s Electron Capital Partners also made a $10.9 million investment in the stock during the quarter. The other funds with brand new SUM positions are Richard Driehaus’s Driehaus Capital, Steve Cohen’s Point72 Asset Management, and Louis Bacon’s Moore Global Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Summit Materials Inc (NYSE:SUM) but similarly valued. These stocks are Camping World Holdings, Inc. (NYSE:CWH), Onto Innovation Inc. (NYSE:ONTO), Terex Corporation (NYSE:TEX), Brookfield Business Partners L.P. (NYSE:BBU), Danimer Scientific, Inc. (NYSE:DNMR), Werner Enterprises, Inc. (NASDAQ:WERN), and Simmons First National Corporation (NASDAQ:SFNC). This group of stocks’ market values are similar to SUM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CWH | 24 | 325789 | -3 |
| ONTO | 18 | 297070 | -1 |
| TEX | 31 | 501779 | 8 |
| BBU | 3 | 6237 | 0 |
| DNMR | 30 | 533383 | 12 |
| WERN | 21 | 213603 | -3 |
| SFNC | 12 | 22164 | 6 |
| Average | 19.9 | 271432 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $199 million in SUM’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 3 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 83.4. 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 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 returned 22.8% in 2021 through July 2nd but still managed to beat the market by 6 percentage points. Hedge funds were also right about betting on SUM as the stock returned 23.9% since the end of March (through 7/2) 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.
