Is Ferguson plc (FERG) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Ferguson plc (NYSE:FERG) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is FERG a good stock to buy? Investors who are in the know were getting more optimistic. The number of bullish hedge fund bets improved by 5 recently. Ferguson plc (NYSE:FERG) was in 5 hedge funds’ portfolios at the end of March. Our calculations also showed that FERG 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.

Nelson Peltz of Trian Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s check out the fresh hedge fund action encompassing Ferguson plc (NYSE:FERG).

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

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5 from the previous quarter. The graph below displays the number of hedge funds with bullish position in FERG over the last 23 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, Trian Partners held the most valuable stake in Ferguson plc (NYSE:FERG), which was worth $1580.1 million at the end of the fourth quarter. On the second spot was Broad Bay Capital which amassed $38.2 million worth of shares. Lionstone Capital Management, Interval Partners, and Schonfeld Strategic Advisors 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 Trian Partners allocated the biggest weight to Ferguson plc (NYSE:FERG), around 18.68% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, designating 5.78 percent of its 13F equity portfolio to FERG.

As one would reasonably expect, key hedge funds have been driving this bullishness. Trian Partners, managed by Nelson Peltz, created the most valuable position in Ferguson plc (NYSE:FERG). Trian Partners had $1.5801 billion invested in the company at the end of the quarter. Richard Scott Greeder’s Broad Bay Capital also made a $38.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Leon Lowenstein’s Lionstone Capital Management, Gregg Moskowitz’s Interval Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ferguson plc (NYSE:FERG) but similarly valued. We will take a look at Dollar Tree, Inc. (NASDAQ:DLTR), Equity Residential (NYSE:EQR), Keysight Technologies Inc (NYSE:KEYS), Fifth Third Bancorp (NASDAQ:FITB), Weyerhaeuser Co. (NYSE:WY), SVB Financial Group (NASDAQ:SIVB), and MPLX LP (NYSE:MPLX). All of these stocks’ market caps match FERG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $710 million. That figure was $1643 million in FERG’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Ferguson plc (NYSE:FERG) is even less popular than MPLX. Our overall hedge fund sentiment score for FERG is 10. 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 gained 17.4% in 2021 through June 18th but managed to beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on FERG, though not to the same extent, as the stock returned 11.6% since the end of March (through June 18th) and outperformed the market as well.

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