Is VMI Stock A Buy or Sell?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Valmont Industries, Inc. (NYSE:VMI).

Is VMI stock a buy or sell? Hedge fund interest in Valmont Industries, Inc. (NYSE:VMI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VMI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare VMI to other stocks including Advanced Energy Industries, Inc. (NASDAQ:AEIS), Gates Industrial Corporation plc (NYSE:GTES), and Physicians Realty Trust (NYSE:DOC) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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 latest hedge fund action surrounding Valmont Industries, Inc. (NYSE:VMI).

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

At the end of December, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VMI over the last 22 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Valmont Industries, Inc. (NYSE:VMI) was held by Impax Asset Management, which reported holding $166 million worth of stock at the end of December. It was followed by Royce & Associates with a $62.4 million position. Other investors bullish on the company included Nitorum Capital, Greenhouse Funds, and ACK Asset Management. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Valmont Industries, Inc. (NYSE:VMI), around 8.86% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, earmarking 6.84 percent of its 13F equity portfolio to VMI.

Seeing as Valmont Industries, Inc. (NYSE:VMI) has experienced declining sentiment from the smart money, logic holds that there were a few fund managers that decided to sell off their entire stakes heading into Q1. At the top of the heap, Steve Cohen’s Point72 Asset Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $3.3 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $3 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Valmont Industries, Inc. (NYSE:VMI). We will take a look at Advanced Energy Industries, Inc. (NASDAQ:AEIS), Gates Industrial Corporation plc (NYSE:GTES), Physicians Realty Trust (NYSE:DOC), United States Steel Corporation (NYSE:X), Grocery Outlet Holding Corp. (NASDAQ:GO), Agree Realty Corporation (NYSE:ADC), and Avient Corporation (NYSE:AVNT). This group of stocks’ market caps resemble VMI’s market cap.

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As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $392 million in VMI’s case. United States Steel Corporation (NYSE:X) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 14 bullish hedge fund positions. Valmont Industries, Inc. (NYSE:VMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VMI is 58.9. 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 gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on VMI as the stock returned 35.4% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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