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What do the top hedge fund and mutual fund gurus like in the construction industry? This article, the 27th in a series, identifies through research of the latest available institutional 13-F filings the gurus that are most invested in the construction industry, and the specific stocks within that Industry that they prefer to hold in their portfolios. The construction industry in this case includes residential and commercial developers, suppliers of building materials and products, and companies engaged in heavy construction projects.
Also, please note that this article will be among the last in this series, as the latest March 2011 quarter 13-F Institutional filings are now beginning to come out. About 40% were out as of this weekend, and most should be filed by the end of this week. As such, once 13-F filings are complete for all guru funds, in the next series starting the end of this week to the beginning of next week, I will bring to you the ‘Top New and Added Picks of Guru Funds" by industry/sector, detailing this time not the top holdings, but more importantly what new positions they took and what existing positions they added to in the latest March 2011 quarter. Please check my article page for previous articles in this series.
A guru is defined as someone who is regarded as having great knowledge, wisdom and authority in a certain area. When it comes to hedge funds, there are a number of ways to anoint leading managers as gurus, including long-term performance, low portfolio volatility and an elite reputation in the investment community.
Many of us are familiar with leading investors and hedge fund managers such as Warren Buffett, George Soros, Carl Icahn and Julian Robertson. But the hedge fund community alone includes over 9,000 funds. Add in mutual funds, ETFs and other investment entities and the number is likely to be at least two to three times that number. While there is no official list of gurus, less than 1%, or between 100 to 200 fund managers, are commonly believed by the larger investment community to have earned the distinction of being called gurus.
The study of the investing habits of gurus can be informative as these are very savvy, well-respected investors with high personal net worth and deploying large sums of capital from their funds on a regular basis. They have a long-term track record of success, and while one can easily just ride their coattails, the savvy investor may want to use these lists as a starting point to conduct their own due diligence.
The total capitalization of the U.S. equity markets is somewhere in the $15 trillion range, and the total market capitalization of construction companies is $165 billion, or 1.1% of the overall market. The table lists the top five investment gurus whose funds have invested at least 3.3% or three times the average in the construction industry. The following is a list of the top construction company picks of guru funds over-concentrated in that sector:
  • Home builders such as Pulte Group, Inc. (NYSE:PHM), a builder of single-family detached homes, town-houses, condominiums and duplexes in 29 states; DR Horton Inc. (NYSE:DHI), a builder of single-family detached homes in 26 states; Lennar Corp. Cla (NYSE:LEN), a builder of single-family attached and detached homes in 14 states; KB Homes (NYSE:KBH), a builder of single-family attached and detached homes, town-homes and condominiums in nine states across the U.S.; NVR Inc. (NYSE:NVR), a builder of single-family detached homes, town homes and condominium buildings in 14 states; and Meritage Homes Corp. (NYSE:MTH), a builder of single-family attached and detached homes for first and second-time move-up buyers in the southern and western U.S.
  • International suppliers of building materials such as Cemex SAB (NYSE:CX), a Mexican manufacturer of cement, ready-mix concrete, aggregates and related materials; and CRH Plc ADR (NYSE:CRH), an Irish manufacturer of cement, asphalt and building products for commercial and residential industries.
  • U.S. based suppliers of building materials such as USG Corp. (NYSE:USG), a manufacturer and distributor of building materials for residential, non-residential and for repair and remodel construction; Eagle Materials Inc. (NYSE:EXP), a manufacturer of gypsum wallboard and cement products for residential, commercial and infrastructure applications; Vulcan Materials Co. (NYSE:VMC), a producer of construction aggregates, asphalt mix and concrete for the construction and paving industries; and Martin Marietta Materials (NYSE:MLM), a producer of granite, limestone, gravel and other aggregates for infrastructure, commercial and residential construction markets.
  • U.S. based suppliers of building products such as Masco Corp. (NYSE:MAS), a manufacturer of cabinets, plumbing and other products for the home improvement and new construction markets; Armstrong World Industries (NYSE:AWI), a manufacturer of flooring products, ceiling systems, and kitchen and bathroom cabinets for remodeling and construction markets; Watsco Inc. (NYSE:WSO), a distributor of air conditioning, heating and refrigeration products for the replacement and home-building markets; Trex Company Inc. (NYSE:TREX), a manufacturer of wood-alternative decking, railing and fencing products for the residential and commercial markets; Deltic Timber Corp. (NYSE:DEL), a manufacturer of lumber from 445,800 acres of timberland in AK and LA; Watts Water Technologies (NYSE:WTS), a manufacturer of water conservation, quality, safety and flow products for plumbing, heating and do-it-yourself markets.
  • Stanley Black & Decker (NYSE:SWK), a manufacturer of hand and mechanics tools for the construction industry, catering to professional, industrial and consumer markets.
  • Heavy Construction companies such as Chicago Bridge & Iron Co. (NYSE:CBI), a provider of construction and related services to hydrocarbon, oil and gas, chemical, power, water and metals industries; Layne Christensen Co. (NASDAQ:LAYN), a provider of construction and drilling services and products to the water infrastructure and mineral exploration markets; Shaw Group Inc. (NYSE:SHAW), a provider of engineering, technology, construction, fabrication, environmental and industrial services to energy companies, industries, utilities and government agencies worldwide; Aecom Technology Corp. (NYSE:ACM), a provider of construction management and planning services to the transportation, facilities and environmental markets.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Equities of Companies in the Construction Industry
Major Construction company positions in Portfolio
Schneider Capital Management Corp. (Arnold Schneider)
Mutual Fund and Separate Accounts - Deep Value
$ 1.8 billion
5.3%
KBH, NVR, MTH
Wallace R Weitz & Co (Wallace Weitz)
Mutual Fund – Value Investing
$ 2.3 billion
5.1%
MLM, EXP, VMC
Balyasny Asset Management (Dmitry Balyasny)
Hedge Fund – Multi-strategy
$ 1.8 billion
4.6%
AWI, WSO, TREX
Keeley Asset Management (John Keeley)
Mutual Fund – Small- and Mid-capitalization equities
$ 6.2 billion
4.4%
CBI, DEL, LAYN, SHAW, ACM, WTS
Brandes Investment Partners, LP (Charles Brandes)
Investment Advisory Firm - Value-oriented
$ 46 billion including $16 billion in US Equities
3.8%
CX, MAS, CRH, SWK, LEN, USG, PHM, DHI
Wayne, Pa.,-based Schneider Capital Management, founded in 1996 by Arnold Schneider, offers four value-style strategies based on a fundamental approach to investing, and caters to approximately 27 separate account clients and several thousand mutual fund shareholders. The company focuses on equities throughout the capitalization range and offers strategies ranging from small- to large-cap equity strategies.
Omaha, NE-based Wallace R. Weitz & Co, founded in 1983 by Guru Wallace Weitz, manages assets for the Weitz Funds, individuals, corporations, pension plans, foundation and endowments. The company seeks understandable, well-managed, cash-generating businesses, and bases investment decisions on the present value of the future free cash that the business will generate.
Chicago-based Hedge Fund Balyasny Asset Management, founded by Dmitry Balyasny in 2001, is a multi-strategy manager that combines fundamental sector research and trading with a dynamic capital allocation system.
John Keeley is portfolio manager for the $6.2 billion Mutual Fund Keeley Fund Management. He focuses on the small- and mid-capitalization sector of the equities market, and focuses on companies undergoing corporate events such as spin-offs, companies emerging from bankruptcy, and distressed utilities.
Brandes Investment Partners, LP, founded by guru Charles Brandes in 1974, manages $46 billion in equity and fixed income investments for institutional and private clients worldwide, including over $16 billion in U.S. equities. Brandes makes security selection based on the value investing approach pioneered by Benjamin Graham.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online, Zacks Investment Research, DailyGraphs, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Construction Company Picks by Fund Gurus Concentrated in the Sector