Did Hedge Funds Drop The Ball On Lennar Corporation (LEN) ?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Lennar Corporation (NYSE:LEN) makes for a good investment right now.

Is Lennar Corporation (NYSE:LEN) a splendid stock to buy now? The best stock pickers are getting less optimistic. The number of long hedge fund bets dropped by 4 in recent months. Our calculations also showed that LEN isn’t among the 30 most popular stocks among hedge funds. LEN was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 66 hedge funds in our database with LEN holdings at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glenn Greenberg

We’re going to take a peek at the recent hedge fund action surrounding Lennar Corporation (NYSE:LEN).

What does the smart money think about Lennar Corporation (NYSE:LEN)?

At the end of the fourth quarter, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 65 hedge funds held shares or bullish call options in LEN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Greenhaven Associates, managed by Edgar Wachenheim, holds the biggest position in Lennar Corporation (NYSE:LEN). Greenhaven Associates has a $366.1 million position in the stock, comprising 7.1% of its 13F portfolio. Coming in second is Eminence Capital, managed by Ricky Sandler, which holds a $148.4 million position; 2.9% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish comprise Glenn Greenberg’s Brave Warrior Capital, Gavin M. Abrams’s Abrams Bison Investments and Martin Whitman’s Third Avenue Management.

Seeing as Lennar Corporation (NYSE:LEN) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Dan Loeb’s Third Point sold off the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $241.4 million in stock, and Jonathan Litt’s Land & Buildings Investment Management was right behind this move, as the fund cut about $40.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lennar Corporation (NYSE:LEN) but similarly valued. These stocks are Annaly Capital Management, Inc. (NYSE:NLY), MGM Resorts International (NYSE:MGM), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), and Laboratory Corp. of America Holdings (NYSE:LH). All of these stocks’ market caps match LEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NLY 16 160541 -7
MGM 46 1590466 -3
KOF 6 476689 -2
LH 38 912658 -2
Average 26.5 785089 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $1693 million in LEN’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Lennar Corporation (NYSE:LEN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on LEN as the stock returned 22% and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.