Is James Hardie Industries plc (JHX) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards James Hardie Industries plc (NYSE:JHX) to find out whether there were any major changes in hedge funds’ views.

Is JHX a good stock to buy? James Hardie Industries plc (NYSE:JHX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that JHX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare JHX to other stocks including NovoCure Limited (NASDAQ:NVCR), Alliant Energy Corporation (NASDAQ:LNT), and Evergy, Inc. (NYSE:EVRG) to get a better sense of its popularity.

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.

David E. Shaw of D.E. Shaw

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $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 we’re going to take a look at the recent hedge fund action surrounding James Hardie Industries plc (NYSE:JHX).

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

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in JHX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in James Hardie Industries plc (NYSE:JHX), worth close to $8.8 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $2.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to James Hardie Industries plc (NYSE:JHX), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0018 percent of its 13F equity portfolio to JHX.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as James Hardie Industries plc (NYSE:JHX) but similarly valued. These stocks are NovoCure Limited (NASDAQ:NVCR), Alliant Energy Corporation (NASDAQ:LNT), Evergy, Inc. (NYSE:EVRG), Mohawk Industries, Inc. (NYSE:MHK), Tenaris S.A. (NYSE:TS), Novavax, Inc. (NASDAQ:NVAX), and W.R. Berkley Corporation (NYSE:WRB). This group of stocks’ market valuations are closest to JHX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $733 million. That figure was $13 million in JHX’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks James Hardie Industries plc (NYSE:JHX) is even less popular than TS. Our overall hedge fund sentiment score for JHX is 29. 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. Hedge funds clearly dropped the ball on JHX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on JHX as the stock returned 13.2% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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