Vulcan Materials Company (VMC): Are Hedge Funds Right About This Stock?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over the recent hedge fund activity in Vulcan Materials Company (NYSE:VMC).

Vulcan Materials Company (NYSE:VMC) was included in the equity portfolios of 41 investors from our database at the end of September, down from 42 funds at the end of the previous quarter. However, 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 Digital Realty Trust, Inc. (NYSE:DLR), DaVita HealthCare Partners Inc (NYSE:DVA), and Goldcorp Inc. (USA) (NYSE:GG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a look at the fresh action encompassing Vulcan Materials Company (NYSE:VMC).

What does the smart money think about Vulcan Materials Company (NYSE:VMC)?

A total of 41 funds tracked by Insider Monkey were bullish on Vulcan Materials at the end of the third quarter, which represents a decline of 2% from the end of June. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Stephen Mandel’s Lone Pine Capital has the number one position in Vulcan Materials Company (NYSE:VMC), worth close to $568.7 million, amounting to 2.5% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Heebner’s Capital Growth Management, with a $111.9 million position; 5.3% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism consist of Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Since Vulcan Materials Company (NYSE:VMC) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few funds that elected to cut their positions entirely between July and September. Intriguingly, Patrick Degorce’s Theleme Partners sold off the largest investment of the 700 funds tracked by Insider Monkey, totaling close to $164.5 million in stock, and First Eagle Investment Management was right behind this move, as the fund cut about $129.4 million worth.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vulcan Materials Company (NYSE:VMC) but similarly valued. These stocks are Digital Realty Trust, Inc. (NYSE:DLR), DaVita HealthCare Partners Inc (NYSE:DVA), Goldcorp Inc. (USA) (NYSE:GG), and CenturyLink, Inc. (NYSE:CTL). This group of stocks’ market values resemble VMC’s market value.

As you can see these stocks had an average of 26 funds with long positions and the average amount invested in these stocks was $1.08 billion. That figure was $1.41 billion in VMC’s case. DaVita HealthCare Partners Inc (NYSE:DVA) is the most popular stock in this table, while Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Vulcan Materials Company (NYSE:VMC) 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.