Is Beacon Roofing Supply, Inc. (BECN) A Good Stock To Buy?

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Beacon Roofing Supply, Inc. (NASDAQ:BECN).

Is BECN a good stock to buy? Beacon Roofing Supply, Inc. (NASDAQ:BECN) has seen a decrease in enthusiasm from smart money in recent months. Beacon Roofing Supply, Inc. (NASDAQ:BECN) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. Our calculations also showed that BECN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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Peter Algert of Algert Global

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Do Hedge Funds Think BECN Is A Good Stock To Buy Now?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in BECN a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Iridian Asset Management held the most valuable stake in Beacon Roofing Supply, Inc. (NASDAQ:BECN), which was worth $125.8 million at the end of the second quarter. On the second spot was Fisher Asset Management which amassed $75.2 million worth of shares. Maverick Capital, Skylands 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 Highside Global Management allocated the biggest weight to Beacon Roofing Supply, Inc. (NASDAQ:BECN), around 7.1% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, designating 4.27 percent of its 13F equity portfolio to BECN.

Seeing as Beacon Roofing Supply, Inc. (NASDAQ:BECN) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few hedge funds that decided to sell off their positions entirely last quarter. Interestingly, Michael Gelband’s ExodusPoint Capital cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $1.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $1 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Beacon Roofing Supply, Inc. (NASDAQ:BECN) but similarly valued. These stocks are Commercial Metals Company (NYSE:CMC), Six Flags Entertainment Corp (NYSE:SIX), First Hawaiian, Inc. (NASDAQ:FHB), Allogene Therapeutics, Inc. (NASDAQ:ALLO), Sana Biotechnology, Inc. (NASDAQ:SANA), Covetrus, Inc. (NASDAQ:CVET), and ServisFirst Bancshares, Inc. (NASDAQ:SFBS). All of these stocks’ market caps are similar to BECN’s market cap.

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As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was $359 million in BECN’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand First Hawaiian, Inc. (NASDAQ:FHB) is the least popular one with only 10 bullish hedge fund positions. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BECN is 38.2. 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. 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 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 gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately BECN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BECN were disappointed as the stock returned -3.6% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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