Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: TopBuild Corp (NYSE:BLD).
TopBuild Corp (NYSE:BLD) investors should pay attention to an increase in enthusiasm from smart money lately. BLD was in 23 hedge funds’ portfolios at the end of the third quarter of 2015. There were 3 hedge funds in our database with BLD holdings at the end of the previous quarter (when the stock started trading). 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 Talmer Bancorp Inc (NASDAQ:TLMR), First Financial Bancorp (NASDAQ:FFBC), and ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) to gather more data points.
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To most investors, hedge funds are seen as slow, outdated investment tools of yesteryear. While there are over 8000 funds trading at the moment, We look at the bigwigs of this club, approximately 700 funds. These investment experts orchestrate the majority of the hedge fund industry’s total asset base, and by paying attention to their highest performing investments, Insider Monkey has determined a few investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, we’re going to analyze the recent action encompassing TopBuild Corp (NYSE:BLD).
What does the smart money think about TopBuild Corp (NYSE:BLD)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 667% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Silver Point Capital, managed by Edward A. Mule, holds the most valuable position in TopBuild Corp (NYSE:BLD). Silver Point Capital has a $67.2 million position in the stock, comprising 8.6% of its 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson’s Adage Capital Management, with a $32.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Gunnar Overstrom’s Three Corner Global Investors.
Consequently, key hedge funds were leading the bulls’ herd. Silver Point Capital created the most valuable position in TopBuild Corp (NYSE:BLD). Adage Capital Management also initiated its stake during the quarter. The other funds with new positions in the stock are Citadel Investment Group, D E Shaw, and Three Corner Global Investors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as TopBuild Corp (NYSE:BLD) but similarly valued. These stocks are Talmer Bancorp Inc (NASDAQ:TLMR), First Financial Bancorp (NASDAQ:FFBC), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), and NBT Bancorp Inc. (NASDAQ:NBTB). This group of stocks’ market caps resemble BLD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TLMR | 14 | 84803 | -1 |
| FFBC | 11 | 26022 | 3 |
| ZIOP | 9 | 48308 | -6 |
| NBTB | 5 | 11273 | -1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $241 million in BLD’s case. Talmer Bancorp Inc (NASDAQ:TLMR) is the most popular stock in this table with 14 funds holding shares, while NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one. Compared to these stocks TopBuild Corp (NYSE:BLD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.