Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool for identifying the next stock to invest in.
Is William Lyon Homes (NYSE:WLH) worth your attention right now? Investors who are in the know are turning bullish. The number of long hedge fund positions went up by 7 in recent months. At the end of this article we will also compare WLH to other stocks including Washington Trust Bancorp (NASDAQ:WASH), Mercer International Inc. (NASDAQ:MERC), and First Potomac Realty Trust (NYSE:FPO) to get a better sense of its popularity.
In today’s marketplace there are plenty of formulas market participants put to use to analyze stocks. Some of the most underrated formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a very impressive amount (see the details here).
Now, we’re going to take a gander at the latest action surrounding William Lyon Homes (NYSE:WLH).
How have hedgies been trading William Lyon Homes (NYSE:WLH)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a 50% rise from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, John Paulson’s Paulson & Co has the biggest position in William Lyon Homes (NYSE:WLH), worth close to $68.4 million, corresponding to 0.4% of its total 13F portfolio. The second-most bullish fund manager is Luxor Capital Group, led by Christian Leone, holding a $49.3 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Ken Griffin’s Citadel Investment Group, Robert Hockett’s Covalent Capital Partners, and Ken Heebner’s Capital Growth Management.