In this article, we shared the 10 stocks that are on hedge funds’ radar now. Check out the first part of the article here. Below, we discuss the final five stocks:
5. Vulcan Materials Company (NYSE:VMC)
2024 Performance: 8.6%
Number of hedge fund holdings in Q4:41
Established in 1909, Vulcan Materials Company (NYSE:VMC) produces and supplies construction aggregates and operates through Aggregates, Asphalt, Concrete, and Calcium segments. Vulcan Materials Company (NYSE:VMC) reported year-on-year revenue growth rate of 6.38% in 2023 compared to previous year and the estimate for the current year is 23.40%. In Vulcan Materials Company (NYSE:VMC) Q1 2024 Earnings Call the management shared their views on the company and the current quarterly performance. Vulcan Materials Company (NYSE:VMC) beat earnings expectations in Q1 2024. The cyclicality of industry and competition may pose potential risks for Vulcan Materials Company (NYSE:VMC), while the growth in the industry, robust pricing power, and increased demand help to mitigate those risks. Insider Monkey’s “Best Construction Materials Stocks To Invest In Right Now” article featured Vulcan Materials Company (NYSE:VMC).
Baron Real Estate Fund stated the following regarding Vulcan Materials Company (NYSE:VMC) in its first quarter 2024 investor letter:
“We added to our position in Vulcan Materials Company (NYSE:VMC) during the most recent quarter. Vulcan is a real estate-related company that is the largest construction aggregates producer in the U.S. Vulcan generates approximately 90% of its gross profit from mining, processing, and transporting crushed stone, sand, and gravel (collectively, “aggregates”) from its quarries. The balance of its gross profit is derived from strategically located ready-mix concrete and asphalt. The company’s products are sold and utilized in infrastructure projects such as highways, as well as residential and non-residential construction. Vulcan has local leadership positions across its footprint.
We believe aggregates are an attractive business for two main reasons: • High barriers to entry limit new competition: Permits to open new quarries are difficult to obtain, and the approval process typically takes 5 to 10 years • Consistent pricing power through cycles: Aggregates producers have historically enjoyed great pricing power owing to the difficulty in opening competing new quarries, the limited substitutes for quality aggregates, and a high weight-to-price ratio that makes transportation expensive relative to the cost of the material. In the last 30 years, pricing of aggregates has increased, on average, 4% per year…” (Click here to read the full text)
4. Xylem Inc. (NYSE:XYL)
2024 Performance: 20%
Number of hedge fund holdings in Q4:32
Founded in 2011, Xylem Inc. (NYSE:XYL) specializes in the design, manufacture, and servicing of engineered products and solutions. Investment management companies view Xylem Inc. (NYSE:XYL) as a potentially profitable opportunity. Artisan Mid Cap Fund discussed Xylem Inc. (NYSE:XYL) in its Q4 2023 letter, as it added a small position to its portfolio. However, due to its increased profitability Xylem Inc. (NYSE:XYL) has now been increased to a fully weighted investment in the recent quarter. Xylem Inc. (NYSE:XYL) is a leading company in the water treatment business and has reported 28.59% year-on-year revenue growth in 2023, with an estimated growth of 10.80% for the current year. Recent share price appreciation and long-term growth potential make Xylem Inc. (NYSE:XYL) a lucrative investment.
Artisan Mid Cap Fund stated the following regarding Xylem Inc. (NYSE:XYL) in its first quarter 2024 investor letter:
“Notable adds in the quarter included Xylem Inc. (NYSE:XYL), NVR and Equifax. Xylem is a global leader in water technology across pumps, smart meters and treatment services. More than 80% of the company’s sales come from markets where it maintains the No. 1 or No. 2 market position. Xylem’s pumps business (sold primarily to utilities) is sticky and profitable, providing capital to invest in innovative solutions, such as smart meters. In mid-2023, Xylem completed the acquisition of Evoqua, giving it a leading position in the US water treatment business. We believe the company is at the start of a compelling profit cycle. Smart meter sales are recovering from supply chain issues, cost and revenue synergies from its acquisition are in the early innings, and a newly hired and well-respected CFO should help catalyze long-awaited margin expansion. Meanwhile, rising demand for solutions to water sustainability challenges should be a trend for years to come. Financial results were thesis affirming, including revenue, margins and earnings that exceeded expectations. We decided to bring the position into the CropSM of the portfolio.”
3.Turning Point Brands, Inc. (NYSE:TPB)
2024 Performance: 24.35%
Number of Hedge fund holdings in Q4:16
Established in 1988, Turning Point Brands, Inc. (NYSE:TPB), manufactures, markets, and distributes branded consumer products. The company operates through Zig-Zag Products, Stoker’s Products, and Creative Distribution Solutions segments. As per Turning Point Brands, Inc. (NYSE:TPB) Q1 2024 Earnings Call Transcript, the company continued to progress in the first quarter and generated results in line with and sometimes better than expectations. Turning Point Brands, Inc.’s (NYSE:TPB) growth potential, room for expansion and brand recognition make it an investment choice among potential buyers. Analysts have strong faith in the future prospectus of the company. The growth estimate of Turning Point Brands, Inc. (TPB) for the current year is 7.60%. Insider Monkey featured Turning Point Brands, Inc. (NYSE:TPB) in the article Top 20 Most Valuable Tobacco Companies in the World.
Atai Capital Management stated the following regarding Turning Point Brands, Inc. (NYSE:TPB) in its first quarter 2024 investor letter:
“Turning Point Brands, Inc. (NYSE:TPB) is a manufacturer, marketer, and distributor of branded consumer products. The business has three segments, which we’ll discuss shortly: Stoker’s, Zig-Zag, and New-Gen.
Turning Point Brands has had a somewhat hectic past with a few strategic pivots and three CEOs over the past few years. This is not a well-loved company, and many investors have gotten burned since its 2016 IPO. As a quick anecdote, nearly everyone I’ve spoken to seems to have a negative opinion/story about Turning Point. However, therein lies the opportunity, and we believe the company is now set up for MSD or higher consolidated top-line growth (excluding its new-gen segment) and even faster bottom-line growth.
I do want to add some additional color here. Investors who have previously lost money on Turning Point Brands usually overpaid on the back of what they assumed would be rapid growth in one of its segments. In 2018-2019, their New-Gen segment was expected to continue its rapid growth trajectory through acquisitions and organic growth, but the FDA would crack down on Vapes/E-Cigs, leaving this business in limbo to this day. From 2020-2021, Zig-Zag was over-earning, and investors wrongly extrapolated this growth into the future…” (Click here to read the full text)
2. Avid Bioservices, Inc. (NASDAQ:CDMO)
2024 Performance: 26.92%
Number of hedge fund holdings in Q4:21
Avid Bioservices, Inc. (NASDAQ:CDMO), incorporated in 1981, is a contract development and manufacturing organization. The company operates in an industry that is considered recession-resistant and has a consistent customer base, making it an attractive investment opportunity. Avid Bioservices, Inc. (NASDAQ:CDMO), faced a decline in recent quarters as mentioned in Laughing Water Capital’s Q4 2023 letter, due to short-term headwinds. However, increased demand, capacity expansion, and Avid Bioservices’ specialization continue to attract investors. Please go through Avid Bioservices, Inc. (NASDAQ:CDMO) Q2 2024 Earnings Call Transcript for a better understanding of management’s views on Avid Bioservices, Inc. (NASDAQ:CDMO).
Laughing Water Capital stated the following regarding Avid Bioservices, Inc. (NASDAQ:CDMO) in its first quarter 2024 investor letter:
“As you know, a large portion of our portfolio is invested in Contract Drug Manufacturing Organizations (CDMOs) tied to biologic, or large molecule, pharmaceuticals; specifically, we own shares in Lifecore Biomedical (LFCR), a CDMO focused on fill-finish work for injectable drugs, and Avid Bioservices, Inc. (NASDAQ:CDMO), which is focused on disposable drug substance manufacturing. I am attracted to these investments because at scale, late stage and commercial business is relatively recession resistant (customers do not stop funding drugs that are close to approval, and patients do not stop taking their prescriptions during economic downturns), customers are extremely sticky (moving to a new manufacturer requires an FDA review), the industry is set to benefit from tremendous tailwinds (more than half of the drugs currently in development are large molecule, large molecules are underpenetrated globally), and historically competition has been rational (capacity is rarely built on spec – rather, CDMOs add capacity when their customers ask them to).
Further, while at present both LFCR and CDMO are not generating much cash and thus “screen” poorly, both have available capacity at a time when capacity is scarce, and should benefit from tremendous operating leverage over the next few years as this new capacity is filled up. Importantly, industry dynamics as well as increasing amounts of detail on their respective pipelines suggest that for both companies filling their capacity is very much a “when” rather than an “if.” The thesis for both names is thus that we are just a few years away from large amounts of relatively sticky free cash flow, that should deserve a high multiple…” (Click here to read the full text)
1. A-Mark Precious Metals, Inc. (NASDAQ:AMRK)
2024 Performance: 36.6%
Number of hedge fund holdings in Q4: 15
A-Mark Precious Metals, Inc. (NASDAQ:AMRK), established in 1965, is a precious metals trading company. To know A-Mark’s CEO, Mr. Greg Roberts’ insights on the company please visit A-Mark Precious Metals, Inc. (NASDAQ:AMRK) Q2 2024 Earnings Call Transcript page. Investors consider precious metals as a safe investment during market volatility, and it is less responsive to changing market conditions. The considerable insider buying happened in February 2024 boosted confidence among investors in the growth prospects of A-Mark Precious Metals, Inc. (NASDAQ:AMRK). The growth estimate of A-Mark Precious Metals, Inc. (NASDAQ:AMRK) for the next year is 75.60%.
The hedge fund managers are also optimistic about A-Mark Precious Metals, Inc.’s (NASDAQ:AMRK) the value appreciation. In the Q4 2023 letter, Kingdom Capital Advisors discussed A-Mark Precious Metals, Inc.’s (NASDAQ:AMRK) in detail. Kingdom Capital Advisors was no longer holding A-Mark Precious Metals, Inc. (NASDAQ:AMRK), but expected to buy back it at lower prices due to its growth potential.
Praetorian Capital stated the following regarding A-Mark Precious Metals, Inc. (NASDAQ:AMRK) in its first quarter 2024 investor letter:
“As the world gets increasingly crazy, I believe that people will come to realize that ownership of precious metals, in physical form, as opposed to in a brokerage account, is part of being financially prudent. They will mostly likely buy those coins from a coin dealer, either in person, or online. A-Mark Precious Metals, Inc. (NASDAQ:AMRK) supplies both of those markets as one of the largest players in online coin brokerage through their JM Bullion, LPM, Silver Gold Bull, Goldline, etc. verticals, along with serving as one of the largest wholesalers to local coin shops. A-Mark also has stakes in two mints (Silver Towne and Sunshine).
A-Mark benefits from periods of chaos in two ways. They see transaction volumes increase, and they see the spreads that they can charge widen. During the three years from Fiscal 2021 to 2023, A-Mark earned approximately $7 a share, if you adjust for certain non-recurring items and remove non-cash intangible amortization. We acquired our shares for approximately four times this earnings level, which seems quite cheap for a business with such high returns on capital. That said, the business has seen reduced earnings over the past few quarters, as a result of declining transaction volumes and spreads. I believe that this decline in activity has created a unique opportunity to buy a high-quality business, with substantial insider ownership, at a bargain price. I naturally am enamored of the counter-cyclical nature of the business, which hopefully should help offset the risks to our portfolio in future periods of crisis…” (Click here to read the full text)
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