In this article we will take a look at whether hedge funds think Foundation Building Materials, Inc. (NYSE:FBM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is FBM a good stock to buy now? Foundation Building Materials, Inc. (NYSE:FBM) has seen an increase in hedge fund sentiment lately. Foundation Building Materials, Inc. (NYSE:FBM) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. There were 9 hedge funds in our database with FBM holdings at the end of June. Our calculations also showed that FBM 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.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ian Wace Marshall Wace
Ian Wace of Marshall Wace
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 15 best blue chip stocks 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. 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. Keeping this in mind we're going to check out the recent hedge fund action surrounding Foundation Building Materials, Inc. (NYSE:FBM).
Do Hedge Funds Think FBM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from the second quarter of 2020. On the other hand, there were a total of 25 hedge funds with a bullish position in FBM a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is FBM A Good Stock To Buy?
More specifically, Coliseum Capital was the largest shareholder of Foundation Building Materials, Inc. (NYSE:FBM), with a stake worth $33.6 million reported as of the end of September. Trailing Coliseum Capital was Renaissance Technologies, which amassed a stake valued at $14.3 million. Islet Management, Arrowstreet Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Foundation Building Materials, Inc. (NYSE:FBM), around 3.59% of its 13F portfolio. Islet Management is also relatively very bullish on the stock, dishing out 0.78 percent of its 13F equity portfolio to FBM.
As one would reasonably expect, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most outsized position in Foundation Building Materials, Inc. (NYSE:FBM). Millennium Management had $3.6 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager, Paul Marshall and Ian Wace's Marshall Wace LLP, and Ken Griffin's Citadel Investment Group.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Foundation Building Materials, Inc. (NYSE:FBM) but similarly valued. We will take a look at SI-BONE, Inc. (NASDAQ:SIBN), Core Laboratories N.V. (NYSE:CLB), Inhibrx, Inc. (NASDAQ:INBX), TCR2 Therapeutics Inc. (NASDAQ:TCRR), Brookfield Property REIT Inc. (NASDAQ:BPYU), Kelly Services, Inc. (NASDAQ:KELYA), and Unisys Corporation (NYSE:UIS). This group of stocks' market valuations are similar to FBM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIBN,19,163493,3 CLB,16,113946,-3 INBX,10,177132,10 TCRR,13,179036,5 BPYU,12,76324,0 KELYA,9,10589,-2 UIS,14,55912,-5 Average,13.3,110919,1.1 [/table]
As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $77 million in FBM's case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand Kelly Services, Inc. (NASDAQ:KELYA) is the least popular one with only 9 bullish hedge fund positions. Foundation Building Materials, Inc. (NYSE:FBM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FBM is 44.6. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on FBM as the stock returned 22.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
