The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards James Hardie Industries plc (NYSE:JHX).
James Hardie Industries plc (NYSE:JHX) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. James Hardie Industries plc (NYSE:JHX) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 5. There were 5 hedge funds in our database with JHX holdings at the end of June. Our calculations also showed that JHX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the new hedge fund action surrounding James Hardie Industries plc (NYSE:JHX).
What does smart money think about James Hardie Industries plc (NYSE:JHX)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in JHX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the largest position in James Hardie Industries plc (NYSE:JHX), worth close to $7.1 million, amounting to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $1.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism 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, earmarking 0.0027 percent of its 13F equity portfolio to JHX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified JHX as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks similar to James Hardie Industries plc (NYSE:JHX). These stocks are CNH Industrial NV (NYSE:CNHI), CenterPoint Energy, Inc. (NYSE:CNP), DaVita Inc (NYSE:DVA), Lennox International Inc. (NYSE:LII), Enphase Energy Inc (NASDAQ:ENPH), Beyond Meat, Inc. (NASDAQ:BYND), and Crown Holdings, Inc. (NYSE:CCK). All of these stocks’ market caps resemble JHX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNHI | 18 | 289206 | 1 |
| CNP | 20 | 413380 | -10 |
| DVA | 34 | 3543745 | -1 |
| LII | 34 | 333588 | 10 |
| ENPH | 42 | 1045304 | 2 |
| BYND | 24 | 393648 | -5 |
| CCK | 47 | 1487437 | -4 |
| Average | 31.3 | 1072330 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1072 million. That figure was $12 million in JHX’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks James Hardie Industries plc (NYSE:JHX) is even less popular than CNHI. Our overall hedge fund sentiment score for JHX is 28. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on JHX as the stock returned 23% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow James Hardie Industries Plc (NYSE:JHX)
Follow James Hardie Industries Plc (NYSE:JHX)
Disclosure: None. This article was originally published at Insider Monkey.
