We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore, imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Summit Materials Inc (NYSE:SUM).
Is Summit Materials Inc (NYSE:SUM) a buy? Money managers are turning bullish. The number of bullish hedge fund positions advanced by 9 lately. Summit Materials Inc (NYSE:SUM) was in 30 hedge funds’ portfolios at the end of the third quarter of 2015. There were 21 hedge funds in our database with Summit Materials Inc (NYSE:SUM) holdings at the end of the previous quarter. 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 Chemtura Corp (NYSE:CHMT), On Assignment, Inc. (NYSE:ASGN), and Demandware Inc (NYSE:DWRE) to gather more data points.
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According to most shareholders, hedge funds are viewed as worthless, outdated financial tools of the past. While there are over 8,000 funds with their doors open at present, our researchers look at the masters of this group, approximately 700 funds. These hedge fund managers control the bulk of the smart money’s total asset base, and by observing their best picks, Insider Monkey has unearthed a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, let’s take a glance at the new action regarding Summit Materials Inc (NYSE:SUM).
What have hedge funds been doing with Summit Materials Inc (NYSE:SUM)?
Heading into Q4, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 43% from the second quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard Chilton’s Chilton Investment Company has the most valuable position in Summit Materials Inc (NYSE:SUM), worth close to $39.4 million, accounting for 1.4% of its total 13F portfolio. The second-largest stake is held by Point72 Asset Management, the family office managed by Steve Cohen, holding a $36.7 million position; the firm has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of Anand Parekh’s Alyeska Investment Group, Richard Barrera’s Roystone Capital Partners, and Gabriel Plotkin’s Melvin Capital Management.
As one would reasonably expect, some big names were leading the bulls’ herd. Alyeska Investment Group initiated the most outsized position in Summit Materials Inc (NYSE:SUM). Alyeska Investment Group had $34.2 million invested in the company at the end of the quarter. Jacob Gottlieb’s Visium Asset Management also initiated a $12.4 million position during the quarter. The other funds with new positions in the stock are Jonathan Barrett and Paul Segal’s Luminus Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Alexander Mitchell’s Scopus Asset Management.
Let’s go over hedge fund activity in other stocks similar to Summit Materials Inc (NYSE:SUM). These stocks are Chemtura Corp (NYSE:CHMT), On Assignment, Inc. (NYSE:ASGN), Demandware Inc (NYSE:DWRE), and The Advisory Board Company (NASDAQ:ABCO). This group of stocks’ market caps matches Summit Materials Inc (NYSE:SUM)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHMT | 23 | 436611 | -2 |
| ASGN | 16 | 142618 | -4 |
| DWRE | 12 | 70061 | -3 |
| ABCO | 11 | 172431 | -4 |
As you can see, these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $342 million in Summit Materials Inc (NYSE:SUM)’s case. Chemtura Corp (NYSE:CHMT) is the most popular stock in this table. On the other hand, The Advisory Board Company (NASDAQ:ABCO) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks, Summit Materials Inc (NYSE:SUM) is far more popular among hedge funds and gaining rapidly in popularity. 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.
