Lennar Corporation (LEN), PulteGroup (PHM) & Other Homebuilders Loved by Hedge Funds

Page 1 of 2

There are many different financial indicators that ardent investors must follow, but one of the most important is hedge fund activity. While it’s tempting to think of the smart money’s decisions as insignificant, consider the following: our empirical research shows that individuals who mimic hedge fund activity can beat the market by double-digits year in and year out (see the details of our market-beating strategy here).

Generally speaking, one of the economy’s most bullish macro trends is a continued recovery in housing, and we’re going to take a look at which homebuilders are in hedge funds’ favor. Using our database of the latest 13F filings with the SEC, we can determine how money managers are trading this particular industry.

Lennar Corporation (NYSE:LEN)

Of the more than 400 hedge funds we track at Insider Monkey, Lennar Corporation (NYSE:LEN) had the highest level of interest, with 45 funds invested at the end of the last filing period. Lennar doesn’t pay a stellar dividend—about a 0.4% yield—but it has appreciated more than 86% over the past year. One of the homebuilder’s key advantages is its ability to use specialized deals to attain top-tier acreage at attractive prices. The sell-side expects earnings growth of 10-11% a year over the next half-decade, and at a PEG near 1.4, Lennar’s prospects are fairly valued. According to our data, one of the most bullish hedge funds invested in Lennar is Ken Griffin’s Citadel Investment Group (see Ken Griffin’s favorite stock picks here).

Second on our list is PulteGroup, Inc. (NYSE:PHM), with 32 hedge funds invested. Pulte’s footprint in the housing market is about 25% larger than Lennar’s, and shares of the company have been a better investment—returning 153%—over the past twelve months. At first glance, Pulte’s forward P/E (16.7x) and extremely bullish year-ahead earnings expectations of $1.44 a share look supremely attractive, especially considering it’s forecasted to finish FY2012 with a 67-cent EPS. Over the longer term, however, Pulte’s growth prospects trade at a multiple of 4.5; typically any figure above 2.0 signals an overvaluation. With a five-year expected EPS growth rate nearly identical to that of Lennar, Pulte doesn’t look like a great value at the moment.

Next up is Toll Brothers Inc (NYSE:TOL), which had five fewer bullish hedgies than Pulte at the end of the latest filing period. Wall Street’s forecasts for Toll Brothers are more than twice as optimistic as those placed on Pulte or Lennar; analysts expect EPS growth to average 22.4% a year through 2017. At a PEG near 0.5, it’s clear that investors are severely discounting these prospects, and quite frankly, are unfairly treating Toll Brothers as a low double-digit growth stock when it clearly has much more potential.

How do we know this?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!