Is BECN Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Beacon Roofing Supply, Inc. (NASDAQ:BECN).

Is BECN stock a buy? Hedge fund interest in Beacon Roofing Supply, Inc. (NASDAQ:BECN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BECN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Nu Skin Enterprises, Inc. (NYSE:NUS), Renewable Energy Group Inc (NASDAQ:REGI), and Weingarten Realty Investors (NYSE:WRI) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now let’s take a gander at the new hedge fund action regarding Beacon Roofing Supply, Inc. (NASDAQ:BECN).

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

Heading into the first quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in BECN over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Beacon Roofing Supply, Inc. (NASDAQ:BECN) was held by Iridian Asset Management, which reported holding $113.5 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $63.2 million position. Other investors bullish on the company included Maverick Capital, Lomas Capital Management, and Soapstone Capital. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Beacon Roofing Supply, Inc. (NASDAQ:BECN), around 8.64% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, dishing out 2.56 percent of its 13F equity portfolio to BECN.

Because Beacon Roofing Supply, Inc. (NASDAQ:BECN) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who sold off their entire stakes heading into Q1. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, totaling close to $77.9 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund dumped about $5 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Beacon Roofing Supply, Inc. (NASDAQ:BECN) but similarly valued. We will take a look at Nu Skin Enterprises, Inc. (NYSE:NUS), Renewable Energy Group Inc (NASDAQ:REGI), Weingarten Realty Investors (NYSE:WRI), Tower Semiconductor Ltd. (NASDAQ:TSEM), Avista Corp (NYSE:AVA), Kymera Therapeutics, Inc. (NASDAQ:KYMR), and Livent Corporation (NYSE:LTHM). 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 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $256 million. That figure was $369 million in BECN’s case. Nu Skin Enterprises, Inc. (NYSE:NUS) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Beacon Roofing Supply, Inc. (NASDAQ:BECN) is more popular among hedge funds. Our overall hedge fund sentiment score for BECN is 72.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on BECN as the stock returned 39.7% since the end of December (through 4/19) 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.

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

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