Crispin Odey’s Top Stocks In The Surging Homebuilder Sector

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Odey Asset Management is a London-based hedge fund set up by Crispin Odey in 1991. Interestingly, one of the original investors of this fund was notable investment magnate, George Soros, who invested $150 million of seed capital in Odey Asset Management. Even though the hedge fund firm has experienced both successes and downfalls throughout its existence, its hedge fund manager, Crispin Odey, is well-known for his great macroeconomic bets, including the anticipation of the credit crunch of 2008, and foreseeing that the value of insurers would surge after the September 11 terrorist attacks. After successfully shorting the credit crisis casualties, Crispin Odey posted a very attractive return of 54.8% at the end of that 2008 year. Despite suffering a few substantial losses along its way (e.g. a 44% loss in 1994, when the Federal Reserve unexpectedly lifted interest rates), Odey’s flagship global long/short hedge fund has generated an annualized return of 14% net-of-fees. The fund’s most recent 13F filing reveals that the public equity portfolio managed by Odey has a value of $1.75 billion. In the following article, we will briefly discuss some of the hedge fund’s homebuilder stocks, which enjoyed a big rally on Friday. Those stocks include DR Horton Inc. (NYSE:DHI), Lennar Corp. (NYSE:LEN) and Ryland Group Inc. (NYSE:RYL).

Crispin Odey

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 142% over the last 33 months, which is more than 83 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

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To start with, Odey Asset Management sold approximately 66% of its sizable stake in DR Horton Inc. (NYSE:DHI), ending the latest quarter with 5.24 million shares valued at $149.35 million. Despite suffering a significant slump in late April, the shares of DR Horton have increased by nearly 8% year-to-date. Even more to that, the stock has been rallying lately as the recovery in the housing market is seemingly right around the corner, with the economy of the U.S. gaining momentum. Additionally, the homebuilding industry has embarked on a new wave of mergers and acquisitions, with the deals most likely to be closed quickly as the rumors of a rate hike are expected to materialize into reality soon enough. Unquestionably, DR Horton is among the companies that will benefit the most from the surge in demand from home buyers. Ken Heebner’s Capital Growth Management is among the investors within our database who remain bullish on DR Horton Inc. (NYSE:DHI), owning 9.07 million shares of the company, valued at $258.39 million as of March 31, 2015.

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