Alpha Buying: These Overlooked Stocks Just Got a Hedge Fund Stamp of Approval

All the 13F filings are in this week.

The media and internet have dissected all the information and written volumes about the same small handful of investors that they have written about every quarter for the past five years.

Michael Burry of Scion Asset Management continues to be one of the most covered investors.

The media and internet geniuses report on his buys and sells every quarter like they are important.

For the record, Michael Burry is a brilliant investor and trader.

He made so much money during the financial crisis they made a movie about him.

Everything he does is based on value, and he is very good at what he does.

However, his time frame has changed over the years. Looking at his last several years of filings and his average holding period, it’s less than a quarter.

Unless you are sitting in the office with him copying his trades, you cannot clone his moves.

Knowing what he owned 45 days ago is useless information.

Unless you are a 94-year-old billionaire running one of the largest corporations in the world, knowing what Buffett and Berkshire are doing is of very little value as well.

Knowing what Bill Ackman is doing is interesting, but odds are he bought his stocks during steep pullbacks at lower prices, and once he bought his shares, he likely printed up a 130-page PowerPoint about why it is a great stock and sent it to everyone he ever met.

Knowing something everyone else knows is not an actionable edge most of the time.

I have been tracking institutional buying for over three decades now.

You can make a lot of money by engaging in idea piracy.

However, just as attacking a vessel that had already been plundered multiple times, or one that offloaded its cargo a month ago, was unlikely to result in much swag, stealing from the same investors as everyone else will result in average profits at best.

We need to dig deep and find those vulture investors, deep value specialists, special situation types, growth fanatics, agitators, and buyout artists who are not on everyone’s radar screen (yet) and are putting up big numbers for their investors.

Most investors have never heard of Spruce House Investment Management in spite of the firm’s strong track record of high performance.

The firm is named after the dorm at University of Pennsylvania where the two founders, Benjamin Stein and Zachary Sternberg, first met.

They both come from well-connected families, and early investors in their firm included billionaire real estate investor Barry Sternlicht and famed value investor Seth Klarman.

The firm has evolved since day one to include some high-growth companies with potential to be game changers, but that evolution was not pain-free.

The firm overinvested in highflyers in 2021 and 2022 and had terrible performance.

However, they had the courage of their convictions, and Spruce House had a massive bounce back in 2023 and 2024.

Today the portfolio is partially old-school value and partially high growth, and the blend appears to be working nicely.

While Carvana (Ticker: CVNA), Wayfair (Ticker: W), and DraftKings (Ticker: DKNG) are still large positions for Spruce House, the firm’s latest purchases have more of a Buffettesque feel to them.

The firm was a buyer of shares of (Ticker: QXO) the roofing and building supplies rollup founded by serial acquirer Brad Jacobs.

Jacobs is a serial builder with one of the most impressive track records in modern American business. He’s taken five companies public, creating billions in shareholder value along the way. From United Rentals (Ticker: URI) to XPO Logistics (Ticker: XPO) Jacobs has a proven formula: identify a fragmented industry, build scale through aggressive but strategic acquisitions, layer in technology, and drive operational efficiency.

Spruce House is also buying shares of a spin-off from Jacobs-driven XPO Logistics from a few years ago.

GXO Logistics (Ticker: GXO) is the largest pure-play contract logistics provider in the world, operating over 900 warehouses across more than 30 countries. Spun off from XPO in 2021, GXO focuses on high-efficiency, tech-enabled warehousing and supply chain solutions for blue-chip clients in sectors like e-commerce, aerospace, and healthcare. The company leans heavily on automation, robotics, and data analytics to streamline operations, cut costs, and drive performance, making it a critical player in the global push for smarter, more resilient supply chains.

The final purchase this quarter is another spin-off and roll-up that does not involve Jacobs.

Core & Main Inc. (Ticker: CNM) might not be a household name, but it plays a critical role in keeping America’s water and wastewater systems flowing. Based in St. Louis, Missouri, the company is one of the largest distributors of water, wastewater, storm drainage, and fire protection products in the United States.

With over 320 branches across the country, Core & Main serves a wide customer base that includes municipalities, private water companies, contractors, and engineers involved in infrastructure development and repair.

The company’s business is built around distributing essential products like pipes, valves, fittings, hydrants, and meters—the unseen backbone of modern civil infrastructure. While it may sound basic, the business is deeply entrenched and difficult to disrupt due to the logistical complexity, technical knowledge, and local relationships required in this industry. Much of Core & Main’s value proposition lies in its ability to deliver the right products quickly and accurately, often under tight construction or emergency timelines.

A key part of the firm’s growth strategy has been the aggressive acquisition of smaller regional distributors, allowing it to scale operations, expand its customer base, and deepen its national footprint. Since becoming a standalone company in 2017 following its spinoff from HD Supply (and before that, Home Depot), Core & Main has executed dozens of acquisitions, consolidating what remains a fragmented market.

The company benefits from secular trends in infrastructure investment, especially as federal and state governments ramp up spending on water system upgrades, stormwater management, and fire protection improvements. With recurring repair-and-replace demand from aging infrastructure and growing urbanization, Core & Main occupies a stable niche with long-term tailwinds. Its business, while not flashy, is resilient and supported by both public and private sector infrastructure priorities. Investors looking for a way to play the long-term U.S. infrastructure renewal story might want to keep Core & Main on their radar.

Spruce House is not a name you are likely to hear on CNBC today.

Neither the firm nor the two founders appear to be on social media.

The only folks happy with them are their investors after several years of outstanding returns.

Add these three stocks to your watch list to buy on pullbacks or based on your favorite setup, and I suspect you will be quite pleased with them as well.